Finance Minister Nirmala Sitharaman has targetted the fiscal deficit at 6.8 per cent of the gross domestic product (GDP) in the next financial year beginning April 1, 2021.
Interestingly, the fiscal deficit in 2020-21 is estimated to reach as much as 9.5 per cent, thanks to a bloated expenditure bill arising on account of the outbreak of COVID-19 and moderation in revenue during this fiscal year.
The lockdown of the few months beginning in the month of March 2021 to check the spread of the corona virus adversely impacted economic activity in the country, which led to revenue receipts of the government collapsing and hence a burgeoning deficit.
For the current fiscal year, the government had last year when announcing the budget pegged the same at 3.5 per cent of GDP.
While announcing the Union Budget 2021-22 in the Lok Sabha, the Finance Minister said, the government proposes to bring down the fiscal deficit below 4.5 per cent of GDP by 2025-26.
Fiscal deficit is nothing bit the deficit that the government sees of revenues minus its expenditure. A high fiscal deficit is not good for the country as it come under ratings watch of the sovereign ratings agency.
The government plans to bring down the fiscal deficit gradually in the coming years.