New Delhi: Presenting the Union Budget for FY21, Finance minister Nirmala Sitharaman said on February 1, that the fiscal deficit for 2021 has been pegged at 9.5% of the GDP and will come down to 6.8% in FY22. She also added that the fiscal deficit is expected go down below 4.5% by FY26, while presenting the Revised Estimates as per the Union Budget 2021.
This year fiscal deficit estimation is sharply higher than 3.5% of GDP that was projected in the Budget Estimates last year.
Meanwhile, the Gross market borrowings for next year have been pegged at INR 12 lakh crore, while, Gross expenditure is seen at INR 34.5 lakh crore, whereas, the capital expenditure is expected to be INR 4.39 lakh crore in FY21.
These figures show how badly the coronavirus pandemic has impacted the economy as the government revenues have dipped severely which has led to sharp rise in deficit and market borrowing.
To put on track the limping Indian economy, the government plans to borrow another INR 80,000 crore to fund the deficit this year.
Fiscal deficit is the difference between total revenue and total expenditure of the government and it is an indication of the total borrowings that are needed by the government. The more the fiscal deficit, the more market borrowings the government needs, which means lower funds available for the private sector to borrow. To note, when the government runs a fiscal deficit, it borrows money to meet the difference by raising funds from the market through securities and treasury bills.