Future Of Fiscal Deficit

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  • As per the government estimates fiscal deficit of 6.8 per cent of the gross domestic product (GDP) in the next financial year (2021-22)beginning April 1.
  • However, the fiscal deficit in 2020-21 is estimated to soar up to 9.5 per cent due to rise in expenditure on account of the outbreak of COVID-19 and moderation in revenue during this fiscal year.
  • The lockdown to check the spread of virus adversely impacted the economic activities resulting in contraction in the economy by an estimated 7.7 per cent.
  • For the current fiscal year, the government had earlier pegged the fiscal deficit of 3.5 per cent.
  • While unveiling the 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.
  • The deficit had soared to a high of 4.6 per cent of the GDP in 2019-20, mainly due to poor revenue realisation.

Fiscal deficit is an indication of the government's borrowing to meet the shortfall between expenditure and receipts from taxes and other sources.

Source : Outlook India

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