India’s GDP growth to remain between -6{b1ee4ac4d8d7b8e1af61a560a11ca52574b8103b547ccac8037ce0cdf9e7ba58} to 1{b1ee4ac4d8d7b8e1af61a560a11ca52574b8103b547ccac8037ce0cdf9e7ba58} : Financial commission chairman

The nationwide lockdown, in wake Covid-19 outbreak, is likely to limit India’s GDP growth to -6 per cent to 1 per cent in the financial year 2020-21, NK Singh, chairman of the 15th Finance Commission has said.

NK Singh, who called a meeting on Thursday to discuss the fiscal consolidation roadmap of the central and state governments, told media that the real picture of India’s fiscal health will be assessed only after fourth quarter and first quarter reports are out. However, he said, that experts have predicted that India’s GDP growth will take a substantial hit.

“There is a lot of uncertainty. We will have to look at growth data for the fourth and first quarters to make an assessment of medium-term fiscal path,” NK Singh told reporters.

He added, that India’s GDP growth is expected to be between -6 per cent and 1 per cent this financial year according to experts. A negative growth rate means that the economy will shrink in size.

The entire nation has been under lockdown since March 25 putting both state and central economies under pressure. The government is facing various challenges at the moment, including high rates of borrowing.

The states are going to borrow up to 5 per cent in 2020-21. The states will use this money to fight the Corona battle. The Centre too will see its borrowings shoot up by almost 52 per cent. Investors expect the Reserve Bank of India to continue to buy government debt to reduce pressure on the market.

India had used a fiscal escape clause to widen last year’s fiscal deficit to 3.8 per cent of GDP and had targeted it at 3.5 per cent this year, and at 3.3 per cent and 3.1 per cent over the next two years. The 15th Finance Commission is working on the fiscal consolidation road map at a consolidated level till the fiscal year 2026.

Speaking on healthy infrastructure, NK Singh said, “The expenditure on health sector will need to be significantly ramped up in the coming months as both states and Centre need to be prepared to fight novel coronavirus.”

The Centre had announced a Rs 20-lakh crore package to boost the economy. The fiscal impact of the package has been assessed to be around 1 per cent of gross domestic product. Analysts expect the government to raise its spending later if the virus continues to further cramp economic activities.