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'Centre, state fiscal deficit may touch 13% of GDP'
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SME Times News Bureau | 01 Oct, 2020
The FY21 consolidated fiscal deficit of the Centre and state governments
might touch 13 per cent of GDP, said SBI Ecowrap in a report on
Thursday.
The report said that as per current trends, the
government sticking to borrowing programme though will please the debt
markets, but "looks challenging given the current exceptionally weak
government finances".
"Net revenue slippage of the Centre, after
taking into account increase in excise duty gains along with the
shortfall in tax and non-tax revenue and disinvestment receipts, is
likely to come around Rs 7 lakh crore in current fiscal," the report
said.
"We are thus expecting that consolidated fiscal deficit of
the Centre and States will touch 13 per cent of GDP as per current
trends."
According to the report, sticking to the budgeted
borrowing numbers for now at "least on paper thus indicates large
expenditure cuts that will be clearly inimical to growth".
"In fact, nominal GDP growth number is likely to decline below FY19 levels," the report said.
"The
significant government cash balances also indicate that the government
is currently not spending and thus September is unlikely to be much
better compared to August.
"Besides, the report cited that incremental bank credit growth lost much of the momentum in August.
"The
bad thing is that incremental bank credit that increased in June and
July by Rs 392 bn declined in August by Rs 360 billion, which is mainly
due to decline in credit to personal loans and infrastructure segments,"
the report elaborated.
"Credit to NBFCs, however, jumped in August after 3 successive months of decline.
"Furthermore,
the company said that its bottom up approach suggests that deposit and
credit growth during the current unlock 4 regime witnessed large
declines, with the maximum decline in savings bank deposits and even
bank advances happening in this period across all lockdown and unlock
phases. "The consumer deleverage also declined in August indicating the
stress on household balance sheets now emerging with gusto," the report
added.
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