Fiscal Deficit To Widen Due To New Stimulus Measures

The fiscal deficit could widen by 0.35-0.5% of GDP (assuming Rs 30,000 crores is spent on fertilizer subsidy), CARE Ratings has stated in a report, following the government's announcement of new stimulus measures.

"If only Rs 6000 crore was spent on fertilizer subsidy, the deficit would increase by 0.25%. We had earlier estimated fiscal deficit to be at 9% of GDP in FY21. On account of this additional spending, we now expect fiscal deficit to widen by 0.35-0.5% of GDP (assuming Rs 30,000 crores is spent on fertilizer subsidy)," CARE Ratings has stated.

"The announcements contain measures to boost employment, making funds available to the MSME and stressed sectors, revival of the real estate sector, support to agriculture, ease of doing business, stimulate exports, financing of infra as well as towards R&D of Covid-19 vaccine.

The Government has also increased allocations over the budgetary outlays for 2020-21 as a part of the stimulus programme. The total estimated spending based on today's announcement is Rs 2.65 lakh crs. The total of all the announcements so far made by both Central government and the RBI is Rs 29.87 lakh crs, which as per the Finance Ministers' estimate is 15% of GDP," CARE Ratings has stated.