New Delhi: The gap between government’s total income and expenditure is expected to balloon to Rs 14.6 lakh crore or 7.6 per cent of GDP in FY21 as economic disruptions are set for a long haul due to Covid-19 pandemic, brokerages analysing the deficit numbers said.
The Controller General of Accounts early this month said that the country’s fiscal deficit has expanded to 103.1 per cent of Budget Estimate in the April-July period primarily due to lower tax collection and higher expenditure for Covid-19 relief. The signals are clear indicators that the fiscal deficit would break all previous records to jump to over double the budget targets in FY21.
According to an EcoScope report by Motilal Oswal Financial Services, the higher 7.6 per cent fiscal deficit this year would be on account of an 18 per cent YoY contraction in total receipts and eight per cent growth in total spending.
During an emergency economic situation, it is always the increased government spending that helps to prop up the investment climate and boost demand in the economy. But worrisome aspect this year during the pandemic is that the government spending is expected to be highly skewed towards revenue (or current) spending this year with economic boosters capital expenditure on a decline.
