In her Budget Speech earlier this week, Finance Minister Nirmala Sitharaman said the fiscal deficit for 2020-21 will come at 9.5 per cent and proposed the same to be narrowed down to 6.8 per cent in 2021-22. The wider numbers led to concern over fiscal activism and doubts over the impact on the sovereign rating.
A foreign brokerage said one of the global agencies can downgrade India's sovereign rating to junk as a result of the Budget, while in some quarters, Sitharaman received praise for being transparent.
"The greater transparency in numbers, a long standing demand will enthuse the market and even rating agencies," the economists said.
The budget redefines fiscal rules because it adds off-balance sheet items to the headline deficit, a note said adding that consolidation of finances is a pragmatic move.
Of the Rs 3.1 lakh crore increase in food subsidy bill, a maximum amount of Rs 1.6 lakh crore seems to have shifted from off-balance sheet entry to fiscal estimate, it said.
Net repayments of Rs 1.36 lakh crore of Food Corporation of India balance sheet, it added.
Of the additional expenditure increase of Rs 4.1 lakh crore, including Rs 3.8 lakh crore of revenue expenditure and Rs 0.3 lakh crore of capital expenditure, the actual incremental spending by the government after removing the off balance sheet amount shifted to food subsidy bill is still Rs 2.52 lakh crore, it said.
Adjusting for Rs 48,000 crore fertiliser subsidy arrears of 2019-20, the incremental spending is thus Rs 2.04 lakh crore, it said. This is the direct fiscal stimulus at 1 per cent of GDP in 2020-21, it said.
The government was using off-budget borrowing on a "massive scale" through public sector agencies, it said. However, there has been a progressive decline in extra budgetary resources (EBR) for PSUs to Rs 3.47 lakh crore in 2021-22 from the revised Rs 3.88 lakh crore in 2020-21.
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