The combined fiscal deficit of the Center and the states will exceed 13 per cent of GDP

New delhi date. 28 September 2020, Monday

CARE Ratings has projected that the combined fiscal deficit between the Center and the states of India will be 15 to 18.50 per cent of GDP in the current financial year, with the government of India not announcing any further fiscal cuts.

Corona has disrupted the fiscal calculations of the central and state governments for the current financial year.

While the Centre's deficit is expected to widen to Rs 19.50 lakh crore against a target of Rs 3 lakh crore, the figure is expected to be Rs 7.5 lakh crore against the target of Rs 4.5 lakh crore, the agency said in a report.

This means that the Centre's fiscal deficit could widen to 5 per cent of GDP when the budget target was 7.50 per cent. The deficit of the states will be 6.50 per cent while the budget target has been set at 7.50 per cent.

Thus, the combined fiscal deficit between the Center and the states, which was projected at 6.50 per cent earlier this year, has now more than doubled. In addition, due to low GST revenue, the states will have to raise Rs 2,000 crore from the market, which will push the state's deficit to 3.50 per cent.

According to the report, the combined deficit between the Center and the states is 12.50 per cent of GDP.

According to unaudited financial reports from 12 states for the April-July period, their tax revenue fell by 30 per cent year-on-year while non-tax revenue fell by 3 per cent.