InvestorQ : How has the fiscal deficit for India shaped up as of the end of January for fiscal year 2021?
Anjana Aiyar made post

How has the fiscal deficit for India shaped up as of the end of January for fiscal year 2021?

Khushi Patel answered.
2 years ago

There was not much of a surprise as the central government’s fiscal deficit soared to a level of Rs.12.34 trillion. That is nearly 66.8%, of the Revised Budget Estimates at the end of January. This is the revised fiscal deficit estimates as laid out in the Union Budget pegged at 9.5% of GDP and that is the reason the figure looks to be within control. However, back-ending of subsidies could still be a challenge.

The fiscal deficit for the current year is not comparable with the previous year as the estimates have changed drastically in the current year due to the pandemic. In FY21, the fiscal deficit is estimated at Rs.18.48 trillion, or 9.5% of GDP. The fiscal deficit had to be pegged substantially higher due to tepid revenues from direct and indirect taxes as well as higher spending liability of the government to boost economic growth.

According to the data put out by the Budget Office, the total expenditure incurred stood at Rs.25.17 trillion, which is nearly 73% of the revised estimates for the current fiscal year. This is better than 84.1% of the RE during the same period last but as we said earlier, this is tough to compare as the two years are very different in nature. Interestingly, the government had initially pegged fiscal deficit for FY21 at Rs.7.96 trillion or 3.5% of the GDP.

As stated by the Finance Minister in the Union Budget 2021, the fiscal deficit for the year ending March 2021 is estimated to soar to 9.5% of GDP or Rs.18,48,655 crore in absolute terms. Even in the fiscal year 2019-20, the actual fiscal deficit had soared to a high of 4.6% due to weak revenues in the last quarter. This is likely to raise serious concerns over global ratings but that is a problem, that India will perhaps worry about later.