In FY21, states fiscal deficit may rise 4.5 per cent of GDP: Ind-Ra

Credit rating agency, India Ratings and Research (Ind-Ra) in its latest report has raised concerns saying that the aggregate fiscal deficit of states is expected to now rise to 4.5 per cent of gross domestic product (GDP) in FY21 as against the agency's earlier forecast of three per cent.

The rating agency also noted that like many countries across the globe, India has been hit by COVID-19 pandemic and it has come at a time when the country was already facing a broad-based economic slowdown, with revenues of both the central and state governments under pressure.

Ind-Ra evaluated the budget estimates for FY20 and FY21 of 20 states. Since these states presented their budgets before COVID-19 induced nationwide lockdown, the nominal gross state domestic product (GSDP) growth projected for FY20 by respective state governments is mostly upwards of 10 per cent, which in Ind-Ra's opinion is aggressive and unlikely to be realised.

According to the report, the fallout of COVID-19 crisis will be severe on Indian economy. The extended nationwide lockdown will exacerbate the economic downturn as the agency's estimate pegs the nominal GDP growth at 0.9 per cent for FY21 (FY20 forecast: 6.8 per cent).