Government spending has increased during the Corona epidemic. There is a discussion that the government may make additional tax provisions like corona cess to increase income. But the SBI’s EcoRap report advises the government to refrain from taking such steps.
Dispute Advice Instead of New Tax
In the SBI report, economists have advised not to impose new taxes in the budget to be presented on February 1. He says that to increase income, the government should focus on resolving tax disputes. Till the financial year 2018-19, there was a dispute about tax of about 9.5 lakh crore rupees. This includes Rs 4.05 lakh crore of corporate tax, Rs 3.97 lakh crore of income tax and Rs 1.54 lakh crore of commodity and service tax.
Government’s Deficit is Expected to Reach a Record 7.4%
Due to increased expenditure, the government’s fiscal deficit will increase significantly. Revenue to the government has also decreased due to the epidemic. Revenue budget estimates are estimated to be Rs 3.2 lakh crore less, while expenditure is expected to increase by Rs 3.3 lakh crore. Therefore, the government’s deficit can reach 7.4% of GDP, which will be the highest in at least the last decade. According to the report, the government’s deficit in the current financial year can reach Rs 14.46 lakh crore.
GDP Size to be 30 Lakh Crores less than Budget
target The GDP size in the current financial year is estimated to be Rs 194.8 lakh crore, while in the budget, the government had estimated that it would reach Rs 224.9 lakh crore. It may be less than 30 lakh crore rupees currently. The GDP size in 2019-20 was Rs 204 lakh crore. That is, GDP in March 2021 will be less than March 2020.
Expect Strong Growth in GDP in Next Financial Year
According to the report, the country’s real GDP is projected to fall by 7.7% in FY 2021, while nominal GDP may slip by 4.2%. Adding inflation to real GDP gives nominal GDP figures. In the budget, nominal GDP was projected to grow by 10% this year. Nominal GDP is expected to grow by 15% in FY 2021-22. The government’s deficit may also be Rs 11.67 lakh crore, or 5.2% of GDP.
