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Impact of Covid-19 on Indian economy: An Analysis of fiscal scenarios

Author

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  • Ila Patnaik

    (National Institute of Public Finance and Policy)

  • Rajeswari Sengupta

    (Indira Gandhi Institute of Development Research)

Abstract

Amidst the economic slowdown triggered by the outbreak of the Covid-19 pandemic in India's there have been many demands for the government to announce a large fiscal stimulus to support the economy. Economic growth and tax revenues remain uncertain in 2020-21 making it challenging for thegovernment to finance any addition to the fiscal deficit. In this paper we work out alternative scenarios of fiscal deficit for 2020-21. We find that in our baseline scenario, assuming a 5 contraction in realGDP and a 14.4 contraction in net tax revenue, the fiscal deficit of the central government will be 6.2 of GDP.

Suggested Citation

  • Ila Patnaik & Rajeswari Sengupta, 2020. "Impact of Covid-19 on Indian economy: An Analysis of fiscal scenarios," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2020-026, Indira Gandhi Institute of Development Research, Mumbai, India.
    • Handle: RePEc:ind:igiwpp:2020-026
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    References listed on IDEAS

    as
    1. Singh, Nirvikar & Srinivasan, T. N., 2004. "Fiscal Policy in India: Lessons and Priorities," Santa Cruz Department of Economics, Working Paper Series qt8nx3v467, Department of Economics, UC Santa Cruz.
    2. S. Mahendra Dev & Rajeswari Sengupta, 2020. "Covid-19: Impact on the Indian economy," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2020-013, Indira Gandhi Institute of Development Research, Mumbai, India.
    3. Singh, Nirvikar & Srinivasan, T. N., 2004. "Fiscal Policy in India: Lessons and Priorities," Santa Cruz Department of Economics, Working Paper Series qt8nx3v467, Department of Economics, UC Santa Cruz.
    4. Patnaik, Ila & Pandey, Radhika, 2020. "Moving to Inflation Targeting," Working Papers 20/316, National Institute of Public Finance and Policy.
    5. Rangarajan, C. & Srivastava, D. K., 2011. "Federalism and Fiscal Transfers in India," OUP Catalogue, Oxford University Press, number 9780198070986.
    6. Choudhury, Mita & Mohanty, Ranjan K., 2020. "Role of National Health Mission in Health Spending of States: Achievements and Issues," Working Papers 20/317, National Institute of Public Finance and Policy.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Goswami, Binoy & Mandal, Raju & Nath, Hiranya K., 2021. "Covid-19 pandemic and economic performances of the states in India," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 461-479.
    2. S Rajamohan & J Jenefer & A Sathish, 2021. "Impact of COVID-19 on FMCG Sector," Shanlax International Journal of Management, Shanlax Journals, vol. 8(4), pages 69-74, April.
    3. Pandey, Radhika & Sapre, Amey & Sinha, Pramod, 2020. "What do we gain from Seasonal Adjustment of the Indian Index of Industrial Production (IIP)?," Working Papers 20/322, National Institute of Public Finance and Policy.
    4. Sacchidananda Mukherjee & Shivani Badola, 2021. "Public Financing of Human Development in India: A Review," Indian Journal of Human Development, , vol. 15(1), pages 62-81, April.

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    More about this item

    Keywords

    Fiscal deficit; Covid-19; Fiscal projections; Government borrowing; Tax revenue;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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