Balancing Act: Fiscal expansion to cost 6?ficit in FY22

New Delhi (IANS) Centre's fiscal expansion during the ongoing Covid-19 pandemic induced revenue constraint is set to cost India a fiscal deficit of over 6.5 per cent in the next financial year from 9.5 per cent for FY21.

Overall, the Centre plans to borrow Rs 80,000 crore by the end of the current fiscal, Finance Minister Nirmala Sitharaman proposed in the Budget on Monday.

"To ensure that the economy is given the required push, our BE estimates for expenditure in 2021-2022, are Rs 34.83 lakh crore," she said.

"The fiscal deficit in BE 2021-2022 is estimated to be 6.8 per cent of GDP. The gross borrowing from the market for the next year would be around Rs 12 lakh crore."

At present, the fiscal deficit in RE 2020-21 is pegged at 9.5 per cent of the GDP.

The Central government has funded this deficit through market and multilateral borrowings, as well as small saving funds and short term borrowings.

"We would need another Rs 80,000 crore for which we would be approaching the markets in these 2 months."

Besides, she proposed to amend the FRBM act to institute more elasticity and expand the glide-path till 2025-26.

The FRBM Act mandates a fiscal deficit of 3 per cent of GDP that needs to be achieved by March 31, 2020-2021.

"The effect of this year's unforeseen and unprecedented circumstances has necessitated the submission of a deviation statement... Towards achieving Central Government fiscal deficit along the broad path that I have already indicated; I will be introducing an amendment to the FRBM Act."

According to the minister, the Centre plans to continue on the fiscal consolidation path, and intends to reach a fiscal deficit level below 4.5 per cent of GDP by 2025-2026.

"We hope to achieve the consolidation by first, increasing the buoyancy of tax revenue through improved compliance, and secondly, by increased receipts from monetisation of assets, including public sector enterprises and land."
 

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