FM Nirmala Sitharaman Sunday announced the fifth and final tranche of the Rs 20 lakh crore relief package. Experts agreed that most of the expenditure was contingent and the measures were largely regulatory and the government’s immediate additional expenditure would be minimal.
State Bank of India chief economist Soumyakanti Ghosh and EY’s chief policy advisor DK Srivastava pegged it at 1.01% of GDP or Rs 2.02 lakh crore.
A Nomura report pegged the dent at 0.8% of GDP. “We expect the overall fiscal deficit for FY21 to be 7% of GDP,” the report said. Accounting for certain ambiguities on where certain expenditures would come from, like the Rs 1.5 lakh crore package for the farm sector and other outlays that were not mentioned in the final presentation, Madan Sabnavis, chief economist at Care Ratings put Centre’s additional expenditure at Rs 80,000 crore. Adding this to the Rs 1.93 lakh crore expenditure announcement in March and April, it would come to 1.2-1.3% of GDP, Sabnavis said.
On whether this would be enough, Nomura said: “The package may fall short of mitigating the near-term existential crisis for businesses and workers, but is better designed to improve India’s medium-term growth potential and attract long-term risk capital.”
Barclays said it expects the government to end FY21 with a fiscal deficit of close to 6% of GDP. “We estimate that the actual fiscal impact on the budget will be only Rs 1.5 trillion (0.75% of GDP),” said a report by Rahul Bajoria, chief India economist at Barclays.