The financial year 2020-21 is expected to be a non-event, even if there isn't technically what is understood as a recession, a senior government official said.
"There's no point anymore of the targets set in the Budget. COVID-19 is a global reality and not just India, projections of all economies is nothing anymore," the official told Moneycontrol.
Finance Minister Nirmala Sitharaman in her 2020-21 Budget, pegged fiscal deficit target for 2020-21 at 3.5 percent of gross domestic product (GDP). But in a recent interview, RBI Governor Shaktikanta Das pointed out that FY21 fiscal gap going beyond 3.5 percent has become unavoidable
Real GDP growth was pegged at 6 to 6.5 percent for 2020-21 by the Economic Survey 2019-20. The Budget estimated the Centre’s total expenditure at Rs 30.4 lakh crore. Proceeds from gross tax revenue were estimated at Rs 24.23 lakh crore, and the divestment target for the year was set at Rs 2.12 lakh crore.
"Fiscal deficit, GDP projections, everything will have to be relooked at. We are doing our own assessments. But a final figure would be announced only when the actual impact of this (COVID-19) can be ascertained," the official said.
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Giving a timeline by when the government would announce its revised projections for the year would be difficult as it would not be possible to arrive at any estimation without knowing by when the economy is able to resume completely, the official said.
The International Monetary Fund (IMF) on April 14 slashed growth forecast for the Indian economy, projecting a GDP growth of 1.9 percent in 2020. This comes at a time when the global economy has hit the worst recession as a result of the collapse in economic activity due to the coronavirus-induced lockdown.
On April 27, India Ratings and Research (Ind-Ra) revised its FY21 economic growth forecast for the country further down to 1.9 percent, lowest in the last 29 years, citing the COVID-19 pandemic and the subsequent lockdown.
According to Ind-Ra, Indian economy had registered a GDP growth of 1.1 percent in the financial year 1991-92.
Ind-Ra revised its economic growth estimate for the country from its forecast of 3.6 percent published on March 30, 2020, to 1.9 percent.
Ind-Ra noted that its growth projection is based on the assumption that the partial lockdown will continue till mid-May 2020.
According to Ind-Ra, "GDP may come back to the fourth quarter of 2019-20 fiscal level only by the third quarter (October-December) of current 2020-21 fiscal anticipating resumption of normal economic activities during the second quarter (July-September) of 2020-21 and festive demand during the third quarter of current fiscal (October-December)," it said.
The rating agency said on the fiscal front, the dip in tax/non-tax revenue due to the lockdown, growth slowdown coupled with the need to provide fiscal stimulus will destabilise the fiscal arithmetic of both union and state governments.