Fiscal Deficit Estimated at 9.5% of GDP for 2020-21

Finance Minister Nirmala Sitharaman during the Budget 2021-22 speech said that the fiscal deficit in the next financial year is estimated to be at 6.8 percent of the gross domestic product (GDP).

Key Points

• As per the minister, the fiscal deficit in 2020-21 is estimated to increase up to 9.5%.
• This will be due to a rise in expenditure on account of the outbreak of COVID-19 and moderation in revenue during this fiscal year.
• The nationwide lockdown has adversely impacted the economic activities and resulted in the contraction of the economy by an estimated 7.7%.
• For the present financial year, the government had earlier projected a fiscal deficit of 3.5%.
• While presenting the Budget 2021-22 in the Lok Sabha, the Finance Minister said, the government proposes to bring down the fiscal deficit below 4.5% of GDP by the year 2025-26.
• The Minister said that the government is planning to borrow Rs 80,000 crore during the left 2 months of the current financial year.

What is a fiscal deficit?

The fiscal deficit is the difference between government expenditure and revenue. When the expenditure of the government exceeds its revenue in a year, the condition is the fiscal deficit. It is calculated as the percentage of GDP.