FM Sitharaman pegs fiscal deficit for FY22 at 6.8%

For the current fiscal year, the government had earlier pegged the fiscal deficit of 3.5 per cent

The Centre will incur a huge fiscal deficit of 9.5% of the gross domestic product (GDP) in the current financial year ending March 31 with Covid pandemic having dented the government’s revenue-earning while increasing its expenditures.

The fiscal deficit for 2021-22 has been pegged at 6.8%.

Higher fiscal deficit meant increased borrowings by the Centre as it said it will raise an additional Rs 80,000 crore this year and the gross amount of Rs 12 lakh crore in 2021-22. “Higher spends and investments is the need of the hour to bring normalcy and growth back to post-pandemic levels, even if it is at the cost of interim fiscal deviation. The path to fiscal consolidation was indicated below 4.5% of fiscal deficit by FY 25-26,” said Shanti Ekambaram, Group President of Kotak Mahindra Bank.

According to the Revised Estimate, the gross borrowing for the current financial year was raised to Rs 12.8 lakh crore as against the Budget Estimate of Rs 7.8 lakh crore, registering an increase of 64%.

“The gross borrowing from the market for the next year would be around Rs 12 lakh crore. We plan to continue with our path of fiscal consolidation, and intend to reach a fiscal deficit level below 4.5% of GDP by 2025-2026 with a fairly steady decline over the period,” Finance Minister Nirmala Sitharaman said while unveiling the Budget.

Gross borrowing includes repayments of past loans. Repayment for past loans in the next financial year has been pegged at Rs 2.80 lakh crore.

The Finance Minister said the government plans to borrow Rs 80,000 crore during the residual two months of the current fiscal year.