With Rs 20-trn package, fiscal deficit to balloon to 7.9% in FY21: Report

“We estimate a 4.5% direct impact on fiscal deficit purely because of revenue shortfall / automatic fiscal stabilizer and a 0.9% indirect effect because of GDP change,” the SBI report says

With the government’s Rs 20 trillion stimulus package, the country’s fiscal deficit is likely to be more than double to 7.9 per cent in the current financial year, according to an SBI research report. The report had earlier estimated the fiscal deficit to be 3.5 per cent of GDP this fiscal. The government has announced a cumulative package of Rs 20 trillion, which is nearly 10 per cent of GDP to provide relief to various segments of the coronavirus-hit economy.

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“After taking into account cash outflow of these measures as well as the previous and the recent excise duty hike and DA freeze (amounting to around 0.8 per cent of GDP), we now revise our baseline fiscal deficit (excluding extra-budgetary resources (EBR)) to 7.9 per cent of the revised GDP in FY21 from 3.5 per cent earlier, owing to lower revenues and higher expenditure against the backdrop of COVID-19 pandemic,” the SBI’s research report Ecowrap. said. Baseline fiscal deficit based on CSO’s earlier estimates of GDP is around 7.1 per cent of GDP, it added.

“We estimate a 4.5 per cent direct impact on fiscal deficit purely because of revenue shortfall / automatic fiscal stabilizer and a 0.9 per cent indirect effect because of GDP change,” the report said. The government Rs 20 trillion package includes Rs 1.7 trillion of fiscal stimulus announced in the first phase, Rs 5.6 trillion stimulus provided through various monetary policy measures and Rs 5.94 trillion through the second phase, implying Rs 6.70 trillion package is still to be announced.

Sitharaman dubs India ‘the best place for investors’, promises more reforms

Responding to a question on why investors should allocate funds for India, she said that even if the court system is a bit delayed, India is a transparent and open society

Investors can find no better place in the world than India that has a democracy loving and capitalist respecting environment, Union Finance Minister Nirmala Sitharaman has said. She also assured international investors at an interaction session at the IMF’s headquarters that the government was continuously working to bring reforms.

“It (India) is one of the fastest growing (economies) even today. It has the best skilled manpower and a government that is continuously doing what is required in the name of reforms, above all democracy and rule of law,” Nirmala Sitharaman said on Wednesday.

Responding to a question on why investors should allocate funds for India, she said that even if the court system is a bit delayed, India is a transparent and open society. The rule of law works and there are a lot of reforms happening, even those to cut down delays, she said. “So you will not have anything better… democracy loving, capitalist respecting environment… in India,” Sitharaman said at the event hosted by the Federation of Indian Chambers of Commerce and Industry in association with the US India Strategic and Partnership Forum.

Responding to questions from major insurance companies, who urged her to remove the cap on investment in this sector, she said the government needs to understand what the expectations of the sector are other than removing of the cap...