In a year, when the government had to pump in Rs 20 lakh crore stimulus, RBI had to intervene to boost liquidity in the market and the fiscal deficit which was estimated at 3.5 percent of GDP is now expected to surge to 7.5 percent of the GDP instead, at such unwonted times presenting the budget has to be a far more challenging task than anticipated.
By November of 2020, the Centre's fiscal deficit had already crossed 33 percent over the full year's Budget Estimates (BE). Tax revenue collection stood at 42.1 percent of BE as compared to 45.5 percent of BE during the corresponding year, while non-tax revenues stood at 32.3 percent of BE as compared to 74.3 percent of BE 2019-20 in the corresponding period of last fiscal.
With plunging revenues, surging unemployment, and growing fiscal deficit, the challenge for the finance minister in the upcoming budget is way beyond capacity and comfort zones. On the brighter side, India's economy is showing strong signs of resilience by bouncing back to recovery far more briskly than other economies. These growth spurts are seen in the record-high December 2020 tax collections, burgeoning foreign reserves, and an 80 percent drop in COVID-19 cases.