Nature of stimulus is also a determinant of future prudence

Based on these calculations, we provide an example of how one can finance non-capital primary expenditure worth ₹17.9 lakh crore (inclding a pandemic-related fiscal support of ₹3 lakh crore).

If the corporate tax-gdp ratio is increased from the present level of 1% to 3% (lower than what it was earlier in the decade) in 2021-22 and an additional amount of ₹2.9 lakh crore of capital expenditure is incurred, it would keep the debt-gdp ratio unchanged. Thus a total of ₹8 lakh crore of additional primary expenditure can be financed over and above the 2020-21 level.

Zico Dasgupta is an assistant professor of economics at Azim Premji University