SBI pegs India's fiscal deficit at 7.4% of GDP

New Delhi, India's fiscal deficit in the current financial year is likely to reach 7.4% of the GDP on the back of enhanced government expenditure amid the pandemic, said the SBI Ecowrap report.

The report noted that as per the first advanced estimate of the GDP, real GDP will contract by 7.7% in FY21, and nominal GDP growth is expected at (-) 4.2%. Accordingly, the nominal GDP for FY22 would grow by 15% to ₹224.04 lakh crore.

"Current trends in the GDP for FY21 will translate into ₹3.2 lakh crore net revenue shortfall for the Centre this fiscal and at the same time, expenditure is higher by around ₹3.3 lakh crore, thus taking the fiscal deficit to ₹14.46 lakh crore and with new revised nominal GDP estimate for FY21, it will be around 7.4% of GDP," it said.

For FY22, assuming the government keeps the expenditure growth at 6% over FY21 estimates and overall receipts, excluding borrowing and other liabilities, expected at 25%, it would result in fiscal deficit of around ₹11.67 lakh crore or 5.2% of GDP.

The net market borrowing of the Centre will be around ₹8.8 lakh crore and with repayments of ₹2.7 lakh crore, gross borrowings are expected at ₹11.5 lakh crore, according to the report.

"With states' gross borrowing around ₹9.4 lakh crore, total gross market borrowing would be around ₹20.9 lakh crore, but could have a clear downward bias," it said.


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