InvestorQ : How will the Indian government balance its spending after COVID-19 and the need to keep fiscal deficit in check?
shrinidhi Rajan made post

How will the Indian government balance its spending after COVID-19 and the need to keep fiscal deficit in check?

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Riya Dwivedi answered.
1 year ago
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That will be a challenge but to begin with the Indian government plans to cap its overall spending on Coronavirus-related relief at around Rs.450,000 crore ($60 billion). This limit is on the back of concerns that excess spending could trigger a sovereign rating downgrade. In fact, Fitch has warned that India's sovereign rating could come under pressure if its fiscal outlook deteriorated. There is also a massive fiscal stimulus planned aimed at jobs, tax holidays etc. Due to the sustained lockdown, the $2.9 trillion Indian economy has virtually come to a standstill. If the Rs.2.1 lakh crore privatisation program for this fiscal year does not go through, there could be additional pressure on macros. India has a fiscal deficit target of 3.5% for the current year that runs through March 2021, which it is most likely to miss due to weak revenue collections. A sovereign downgrade could seriously impact the cost of funds for Indian companies.

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