States' aggregate fiscal deficit to rise to 4.5% of GSDP in FY21: Ind-Ra

The agency's earlier forecast was 3%; it says state governments were already facing a lower-than-budgeted share in central taxes and subdued own revenue growth, when the 21-day lockdown was imposed

India Ratings and Research (Ind-Ra) expects the aggregate fiscal deficit of states to rise to 4.5 per cent of their combined gross state domestic product (GSDP) in 2020-21, as against the agency’s earlier forecast of three per cent. 

Ind-Ra said the state governments were already facing a lower-than-budgeted share in central taxes and subdued own revenue growth, when the 21-day lockdown was imposed on March 25. 

The 20 states considered in the analysis constituted nearly 86 per cent of the budgeted aggregate revenue receipts for FY20. The aggregate revenue receipts of these states came in lower by 4.2 per cent than the budgeted, at Rs 24.79 trillion in FY20(RE), primarily led by a 16.2 per cent reduction in the devolution of central taxes against BE. 

States’ own tax revenue receipts were lower by 2.2 per cent in FY20(RE) than Rs 12.04 trillion in FY20(BE). The revenue and fiscal deficit is budgeted at 0.02 per cent and 2.5 per cent of GSDP in FY21(BE).