India's fiscal deficit to be 8.3% of GDP in FY22: Fitch Solutions

10 May '21

2 min read

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The government of India is targeting a fiscal deficit at 6.8 per cent of the gross domestic product (GDP) in fiscal 2021-22, but Fitch Solutions has forecast the deficit to come in at 8.3 per cent of the country’s GDP. The main reason for the wider deficit is revenue shortfall. A fiscal deficit of 8 per cent was projected previously by Fitch Solutions.

Fitch Solutions, the credit analytics and business intelligence platform, said that the main driver of its deficit forecast revision is a downward revision to its outlook for revenues, given that the flare-up in COVID-19 cases in India and containment measures in place will hamper the country’s economic recovery. This will have a negative impact on fiscal revenues.

The government is expected to spend around ₹34.8 lakh crore in the current fiscal that began on April 1, 2021, while the revenue will likely be close to ₹16.5 lakh crore, down from the government’s estimate of ₹17.8 lakh crore due to the second wave of the pandemic, according to media reports.

The government is not expected to increase its spending beyond what was pre-determined in the budget, but the healthcare spending in this fiscal may go beyond the estimated ₹74,600 crore due to the health crisis.

The higher deficit is also due to the difference in the FY22 GDP projections of Fitch Solutions and the Indian government, which are 9.5 per cent and 10.5 per cent, respectively.

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