Don’t look at fiscal rectitude during Covid: Fin panel chief

India should not look at maintaining a path on fiscal rectitude in 2020-21 (AprMar), 15th Finance Commission Chairman N.K. Singh said.

"The fact remains that...this year we can understand that fiscal and debt issues will be problematic and I think in my view, this is not a year in which we should look at any kind of path of fiscal rectitude," Singh said while speaking at an event organised by All India Management Association.

At Rs 4.663 lakh crore, the government's fiscal deficit in Apr-May accounted for 58.6% of the Budget target for the full year and was 27.4% higher on year, according to data released by the Controller General of Accounts.

The Budget for 2020-21 (Apr-Mar) projected the fiscal deficit at 7.963 trln rupees, or 3.5% of GDP.

Due to the severe shortfall in tax revenue and increased demand for government expenditure amidst the pandemic, this number is likely to increase. Singh said that according to estimates, debt-to-GDP ratio is closer to around 80%.

"I think that Q3 (Oct-Dec) and Q4 (Jan-Mar) of the current fiscal year, I mean, there would be a very sharp V-shaped recovery in Q3 and Q4...Nonetheless, the fiscal year as a whole would end in the negative trajectory," Singh said.

Economists expect India's GDP to contract for the first time in over 40 years in the financial year ending March due to the pandemic and the resultant lockdown.

Most economists expect the economy to contract 5-6% in 2020-21, compared with a growth of 4.2% last year.

Cogencis had earlier reported that according to an internal estimate of the finance ministry, the Indian economy was likely to have contracted 20-30% in AprJun as economic activity came to a near halt due to the nationwide lockdown.