Stimulus - 3 The fiscal deficit will increase to 9.50 per cent of GDP

Mumbai, Ta. 13 November 2020, Friday

Another stimulus announced by the central government for the country's economy is expected to widen the country's fiscal deficit to 5.50 per cent of gross domestic product (GDP) in the current financial year. The stimulus includes other schemes, including a production-linked incentive scheme and an increase in the cost behind the fertilizer subsidy.

The government has claimed that the size of the last released stimulus is about one per cent of GDP.

Due to high expenditure and subsidies, the Centre's fiscal deficit could be as high as 2.50 per cent of GDP in the current financial year, the economist said. Earlier in the day, the Center had set a fiscal deficit of 7.50 per cent of GDP for the current financial year. Although the Center has not yet made any changes to its target, various rating agencies have projected the deficit to go up and there is a possibility of further changes.

Care Ratings had earlier set a target of 5 per cent, while HDFC Bank had set a target of 7.50 per cent. However this figure may increase.

Finance Minister Nirmala Sitaram on Thursday announced the self-reliant Bharat Abhiyan-2. This is expected to put an additional burden of Rs 2.5 lakh crore on the exchequer. This figure is going to be 1.50% of the country's GDP.

Of this, Rs 1.5 lakh crore is to be spent in the medium term under the Production Linked Incentive Scheme, which is not within the current financial year, said an analyst.

Earlier, the Center had announced stimulus of Rs 20 lakh crore to support the country's economy.

However, while the results of these stimulus are yet to be seen, the Center has announced Stimulus-2 for a speedy recovery of the economy. Corona virus cases are declining and demand is recovering.