Fiscal deficit for April-January 2020-21 stood at Rs 12.34 lakh crore or 66.8 per cent of the revised estimate of Rs 18.48 lakh core against an earlier estimate of Rs 7.96 lakh crore, according to data released by the Controller General of Accounts. It adds that the Central government’s total expenditure stood at Rs 25.17 lakh crore while total receipts were Rs 12.83 lakh crore during the period. Release of this data now has brought the key issue of fiscal consolidation again to the fore.

These days, economists expect a quicker economic recovery in 2021-22. Businesses are optimistic as well, as reflected by a latest survey, showing around 71 per cent of industry leaders expecting an economic recovery in 2021, against the global average of 57 per cent. Our policy makers are enthusiastic as well, and these expectations, along with our high debt levels, may persuade them to focus on consolidation. But according to some skeptics, shying away at this juncture from running a larger fiscal deficit could prove to be a costly miscalculation.

They opine that risks of 'too much too soon' consolidation will affect the economy’s medium term growth prospects. It will be counterproductive. They add that the Union Budget is not as fiscally expansionary as believed initially and it lacks provisions for adequate spending, and increase in expenditure for the current year is largely driven by transparent accounting of subsidies.

There is little doubt that the Budget this year emphasizes on capital spending aimed towards infrastructure, along with other key sectors, such as financial and health, but success in this regard will largely depend on implementation by the Centre as well as on state governments and their public sector enterprises and the private sector. Budget proposals like setting up of a Development Finance Institution, an Asset Reconstruction Company are welcome. But their efficacy will depend on their implementation.

I invite your opinions.