InvestorQ : How much is the fiscal deficit estimated to scale during the financial year 2020-21?
vaishnavi mhatre made post

How much is the fiscal deficit estimated to scale during the financial year 2020-21?

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vidhya Laxmi answered.
4 months ago
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A recent report in Reuters has pointed out that India’s fiscal deficit for the financial year 2020-21 is likely to touch 7% of GDP. That is nearly twice the estimate committed by the Finance Minister in the previous 2020 budget as part of the Fiscal Responsibility and Budget Management or FRBM Act. However, there is not much surprise about the overshooting.

As the Indian economy faltered and the central banks and governments the world embarked on an unprecedented monetary and fiscal stimulus program, the Indian government did not have much of a choice. It had to resort to multiple rounds of stimulus and there was also a sharp contraction in revenue collections from direct and indirect taxes.

In the previous budget, the FM had estimated total divestment collections of Rs.210,000 crore including the strategic divestment of LIC and Air India. Neither of these divestments looks likely in the current fiscal and may eventually happen only in the next year. Even the annual disinvestment revenues have been less than 20% of the estimated targets.

Now, economics experts estimate that the short fall in revenues from taxes and disinvestments for the year could be as high as Rs.700,000 crore; which could lead to a spurt in fiscal deficit. The final fiscal deficit number will be announced when the FM presents the Union Budget on 01-Feb, it could be in the range of 7-8% for the full year.

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