What is the overall fiscal deficit that is expected for FY21, if you look at the central and state governments put together?

This data is based on a recent report by SBI Macroeconomic Research. According to the SBI Note, the combined central and state fiscal deficit for FY21 is projected to come in at 12.7% of GDP. This higher overall fiscal deficit of the centre and the states put together, is anticipated to happen on the back of higher healthcare spending as well as a possible steep fall in revenues arising as a lag effect of the pandemic.

The research note by SBI has also specifically noted that the average state fiscal deficit across 13 major states had already climbed beyond 4.5% of GDP, which is quite high by historical standards. The report also added that as a result of this combination of higher spending and lower revenues, the fiscal situation had made the balance sheet of many states rather tenuous.

In the Union Budget 2021, the Finance Minister Nirmala Sitharaman had projected the central fiscal deficit at 9.5% of GDP for FY21 and at 6.8% of GDP for FY22. However, for FY21, SBI research has projected central fiscal deficit relatively lower at 8.7%. According to the SBI report, while revenues will improve, the bigger benefit will come because the government may look to back-end many pay outs and that could reduce the fiscal deficit.