Fitch Solutions sees revenue shortfall
International rating agency Fitch Solutions has forecast the Indian central government deficit at 8.3% of GDP in FY22, breaching its target mainly due to revenue shortfall.
“Revenue shortfall remains the main driver of our wider deficit view, as we expect the government to maintain its spending targets,” Fitch said on 7 May 2021, having previously projected a fiscal deficit of 8%.
“The main driver of our deficit forecast revision is a downward revision to our outlook for revenues, given that the flare-up in COVID-19 cases in India and containment measures in place will hamper India’s economic recovery, which will have a negative impact on fiscal revenues,” it said.
The central government expenditure is likely to be around Rs.34.8 lakh crore as it looks to maintain its high pandemic-period spending so as to bolster pace of economic recovery.
Against this, revenue are likely to come in at Rs.16.5 lakh crore, down from government estimate of Rs.17.8 lakh crore on the back of an impaired outlook for India’s economic recovery in FY22 as a result of the ongoing nation-wide coronavirus-induced health crisis.
It did not expect the government to significantly expand spending beyond what has been budgeted.
Based on the FY22 Union Budget, key spending areas planned for were infrastructure (transport, urban development, and power), healthcare, agriculture, and rural development.
“However, given the flare-up in COVID-19 infections in India, which has since overwhelmed the Indian healthcare system, we expect there to be reallocation of spending in favour of healthcare spending this fiscal year,” said Fitch, adding that healthcare spending is projected to be Rs.74,600 crore, 2.1% of total planned FY22 expenditures. This will likely come in higher than projected.
Given the severity of India’s ongoing health crisis, it is likely that more funds will have to be channelled to this scheme to support the rural economy, especially given reports of lockdowns in cities and loss in work once again sending rural migrant workers back to their villages, similar to the nationwide lockdown in Q1 FY21, said Fitch. #economy #investment #health #projects /fiinews.com
