Budget 2020-21: The Narendra Modi government may opt for a flexible fiscal policy so as to boost economic growth in budget 2020, a rating agency said.
Budget 2020 India: The Narendra Modi government may opt for a flexible fiscal policy so as to boost economic growth in budget 2020, a rating agency said. Since the growth in recent times has been largely driven by public spending amid muted consumption and investment, the government may incur higher expenditure, CARE Ratings said in the report. Such a scenario may require the government to reconsider the fiscal slide path which aims to reduce the deficit to 3 per cent of GDP by FY21. “The intended fiscal consolidation plan would have to be pushed forward to later years when domestic economic growth picks up. With revenue collections being lower than expected due to weakness in economic growth, the central government is most likely to breach the gross fiscal deficit target of 3.3% of GDP for 2019-20 by 0.6 -0.8% which would essentially take the revised fiscal deficit to 3.9-4.1% of GDP for the year,” the report noted.
The Indian economy is seeing a slowdown for some time now on account of a fall in consumption and demand. The government announced a slew of measures in the past few months to revive growth ranging from bank recapitalisation and boost in liquidity. The upcoming budget is expected to be watched closely by different quarters of the economy amid the slowdown.
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The rise in fiscal deficit would be Rs 2.2 lakh crore in case of the deficit-increasing by 1 per cent more than the target stipulated at present. It would be an interesting call to be taken by the Modi government, the report said. “The higher fiscal deficit would also involve higher gross market borrowings and can range between Rs 7-7.25 lakh cr in case of conventional fiscal deficit on the path of FRBM to Rs 7.5-7.75 lakh crore in case an additional 0.5% is opted for. The balance would come from NSSF and cash draw down,” CARE Ratings also said.