The fiscal deficit of the Center may reach 7.6 percent more than twice the budget target in the current financial year 2020-21. A report has predicted this on Friday. The report said that the country will need to spend extra to reduce the impact of the Covid-19 epidemic, while the government’s revenue will be less, which will directly affect the fiscal deficit. A report by India Ratings and Research states that the combined fiscal deficit of the Center and states will be 12.1 percent. States will have a 4.5 percent share in this. The report said that the government has already announced the stimulus package, causing the fiscal math to go down 1.1 percent. There is also a demand for a second stimulus package. Due to this epidemic, a long lockdown was imposed in the country which brought economic activity to a standstill.

The rating agency said that the country’s gross domestic product (GDP) will decline by 5.3 percent in the current financial year. At the same time states like Assam, Goa, Gujarat and Sikkim will have a decline in GDP by more than 10 percent. The report said that the growth and fall in revenue will directly affect the fiscal deficit. The fiscal deficit is considered an indicator of macroeconomic health. It states that the fiscal deficit of the Center and states will increase to 12.1 percent of the total in the current financial year. Of this, the fiscal deficit of the Center will be 7.6 percent and that of the states will be 4.5 percent. DK Pant, chief economist at India Ratings and Research, said the epidemic came at a time when the Indian economy was already sluggish due to weak consumer demand. Pant said, “The supply side has been severely affected due to this pandemic, as during the lockdown only limited areas were allowed to produce and sell essential commodities.”