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SBI expects rise in fiscal deficit in FY21

A research report, Ecowrap, by SBI has predicted that the country’s fiscal deficit is likely to be more than double to 7.9% in the current financial year due to the government’s Rs 20 lakh crore stimulus package. The bank had earlier anticipated the fiscal deficit to be 3.5% of GDP this fiscal.

“After taking into account cash outflow of these measures as well as the previous and the recent excise duty hike and DA freeze (amounting to around 0.8 per cent of GDP), we now revise our baseline fiscal deficit (excluding extra budgetary resources (EBR)) to 7.9 per cent of the revised GDP in FY21 from 3.5 per cent earlier, owing to lower revenues and higher expenditure against the backdrop of COVID-19 pandemic,” the study stated.

The forecast cautioned that with higher deficit, the issue of a sustainable debt limit arises. It notes that government debt has risen from 62% in FY11 to 66% in FY19.