You are here: Home » Economy & Policy » News
Business Standard

India's fiscal deficit likely to be over 7% in 2020/21: Report

A fiscal deficit of more than 7% would be higher than some private economists have projected

Fiscal Deficit | Economic recovery | Centre

Aftab Ahmed & Manoj Kumar | Reuters  |  NEW DELHI 

Fiscal deficit, debt
The pandemic and stringent lockdown measures imposed by India in the early stages hit India hard. Illustration: Binay Sinha

India's for year ending in March is likely to be over 7% of gross domestic product, three sources told Reuters, as revenue collections suffered from a lockdown and restrictions to rein in the spread of COVID-19.

India's government had projected a of 3.5% of GDP for the current year last February. It estimated government borrowing of 7.8 trillion rupees, later revised to 12 trillion rupees, to provide relief to millions of people and businesses hurt by the pandemic.

A of more than 7% would be higher than some private economists have projected. Many of them forecast an uptick in tax collections in the second half of the fiscal year. But government sources say the uptick won't be enough to compensate for earlier losses.

"The fiscal deficit will be bigger than what is estimated by some ... Our revenue collections suffered due to the complete lockdown in the first three months and that is hard to recover," said a source with direct knowledge of budget discussions. "What we're looking at is a 7% plus."

Two of the sources said the revenue shortfall from tax and divestment of state-run companies could be as much as 7 trillion rupees.

A finance ministry spokesman declined to comment on the matter. The government has yet to release any revised fiscal deficit estimates.

The pandemic and stringent lockdown measures imposed by India in the early stages hit India hard. Asia's third largest economy recorded its first-ever recession with a contraction of 23.9% in the April-June quarter and a 7.5% fall in the September quarter.

India is set to release its first advance estimates of GDP for the 2020/21 fiscal year later on Thursday.

Another senior government source said government finances were in poor condition because of the shortfall in tax receipts, but the government has limited room to cut spending as revival of the growth remained top priority.

"We could see the worst-ever fiscal deficit numbers in the current financial year," said another government source with direct knowledge of budget matters, adding the fiscal deficit could touch 8% of GDP.

The final fiscal deficit estimates will be announced by Finance Minister Nirmala Sitharaman on Feb. 1, when she presents her annual budget for the next financial year.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Thu, January 07 2021. 16:30 IST