The aggregate fiscal deficit of states for the next financial year to come in at 4.3 per cent of the gross domestic product (GDP), compared to 4.6 per cent (revised) in the current fiscal, according to India Rating and Research (Ind-Ra). The rating agency’s earlier forecast for the current financial year was 4.5 per cent. The revision was made due to a sharper-than-expected contraction of 6.1 per cent year-on-year in the nominal GDP. The agency estimates the nominal GDP to grow 14.5 per cent in the next fiscal year and also that a gradual pick-up in revenue collections could lead to an improvement in the capital expenditure from the financial year 2021-22.
According to Ind-Ra, the share of capex in the total expenditure is likely to be higher at 15.5 per cent in next fiscal – at 2.9 per cent of GDP than 10.5 per cent in current fiscal – 2.1 per cent of GDP. The burden of the fiscal adjustment brought on by the COVID-19 pandemic was met by states through a sharp reduction in capex during the current financial year.
