Macro/Finance Group, NIPFP

Impact of Covid-19 on the Indian Economy: An Analysis of Fiscal Scenarios.

Impact of Covid-19 on the Indian Economy: An Analysis of Fiscal Scenarios., Ila Patnaik and Rajeswari Sengupta. Indian Public Policy Review: A Journal of Economics, Politics and Strategy (IPPR), Vol. 1, No. 1, Pages - 41-52, September, 2020.

Amidst the economic slowdown triggered by the outbreak of the Covid-19 pandemic in India 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 the government 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 real GDP and a 14.4% contraction in net tax revenue, fiscal deficit of the central government will be 6.2% of GDP.

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