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File photo of Finance Minister Nirmala Sitharaman. (PTI)
The government had budgeted Rs 7.8 lakh crore on gross market loans, in the current fiscal, but after the COVID-19 outages, last week it had announced an additional loan of Rs 4.2 lakh crore, bringing the total to Rs 12 lakh crore, mainly to Satisfy the probable income deficit.
- PTI
- Last update: May 15, 2020 2:42 p.m. IST
There is very limited room for fiscal stimulus as the government’s revised Rs 12 lakh crore market loan is expected to be used largely to cover the revenue gap, India Ratings & Research said on Friday.
The government had budgeted Rs 7.8 lakh crore on gross market loans, in the current fiscal, but after the COVID-19 outages, last week it had announced an additional loan of Rs 4.2 lakh crore, bringing the total to Rs 12 lakh crore, mainly to Satisfy the probable income deficit.
According to chief economist at India Ratings, Devendra Kumar Pant, the improved gross loans of Rs 12 lakh crore will largely address the revenue deficit, leaving little room for fiscal stimulus, “unless the Center drastically reduces spending on budgeted capital and prioritize expenses. ”
“This leaves very limited fiscal space for the government as the revenue deficit accounts for up to 95.1 percent of the increase in loans, leaving as little as Rs 20,000 crore for the government to provide fiscal stimulus,” said India Ratings. & Research.
Pant expects the government’s gross and net tax revenue to fall short of the budgeted estimate of Rs 4.32 lakh crore and Rs 2.52 lakh crore, respectively, despite low crude oil prices and increased excise duties on gasoline and diesel , who only get additional Rs 1.6 lakh crore of additional income.
Due to the weak economic activities induced by the blockade and the resulting impact on non-tax revenue, he expects the dividend and earnings and other non-tax revenue to decrease by Rs 1.48 lakh crore from the budget estimate for fiscal year 21.
“This means that the government is looking at a revenue shortfall of Rs 4 lakh crore from the budget estimate for fiscal year 21,” Pants said, cautioning that the government is unlikely to meet the revised fiscal year revenue estimate. 20 due to blockade across the country.
This amount is too small to make any difference in the decline in economic activity and demand. Clearly, the challenge is enormous with hardly any fiscal space, despite an increase in gross loans of Rs 4.2 lakh crore, “he said.
Pant further said, “However, the responsibility falls on the Center to provide support not only to the vulnerable sectors of society but also to the states, because the states incur the real battle against the pandemic and the associated expenses.”
Another concern is the sharp decline in household financial savings amid tighter financial conditions, which began even before the pandemic blockades, as the economy saw a mismatch between national savings and investments.
Households contribute the most to adding gross value (44.3 percent during fiscal year 2012-2019), savings (61.1 percent), and fixed capital (39.2 percent) in the economy.
But household financial savings has been declining over the years and was 6.5 percent of GDP in fiscal year 19 compared to 8.1 percent in fiscal year 2016. In fiscal year 19, this decreased to Rs 12.3 lakh crore from Rs 13.2 lakh crore FY18.
On the other hand, central state and state loans have increased over the years. Net loans from the Center, states and central public sector (PSU) companies increased almost threefold to Rs 18.89 lakh crore or 9.3 percent of GDP in FY21 from Rs 6.19 lakh crore or 7.1 percent in FY12, according to the report .
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