InvestorQ : How did the fiscal deficit for FY21 come lower than budgeted?
prachi Patwardhan made post

How did the fiscal deficit for FY21 come lower than budgeted?

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sara Kunju answered.
1 month ago
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Lower than expected fiscal deficit is always good news. That is of course, assuming that the expectation is not too low. That was the case with the fiscal deficit. For FY21, India’s fiscal deficit came in at 9.3% instead of 9.5% largely due to better tax revenues in last few months. GDP boost in the last quarter also helped to pull down the fiscal deficit as a share of GDP. However, that was only because fiscal deficit was already loosened from 3.5% to 9.5%.

Here is why, this number has to be take with a pinch of salt. For FY22, the market borrowings are at par with FY21 at Rs.12 trillion. Government may have to borrow another Rs.3 trillion to compensate the states for GST dues of last year and current year. This may make the 6.8% target of FY22 closer to 8.5% eventually. Also, this is only the central fiscal deficit and state fiscal deficit has also been getting worse.

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