Page 431 - ES 2020-21_Volume-1-2 [28-01-21]

58 Economic Survey 2020-21 Volume 2

2.16 During the past months, positive signs of recovery in revenue collections have been seen
in terms of positive growth in monthly GST collections and more than 50 per cent growth in
revenue receipts for the month of October 2020 and November 2020 relative to the corresponding
months of 2019. However, given the adverse impact of COVID-19 on economic activities
particularly the decline in individual and corporate incomes, consumption of goods and services
and the muted domestic and international trade in the first half of FY 2020-21, it is expected
that the tax revenues may fall short of the Budget estimates during 2020-21. Therefore keeping
in view the concurrent demand of expenditure pertaining to the stimulus packages announced
by the Government during the year to mitigate the impact of the pandemic and the anticipated
revenue shortfall, it is expected that the fiscal deficit of the Central Government may overshoot
its Budget Estimate for the current fiscal year. The details of the fiscal policy stimulus package
announced by Government in response to COVID-19 may be seen in Box 2.
2.17 In view of this shock on the fiscal system induced by COVID-19, the important
concern therefore is whether the medium term fiscal policy strategy should focus on growth
or fiscal restraint. Chapter 2 in Volume I of the Survey discusses this in detail. Adoption of
countercyclical expansionary fiscal policy in times of crisis is expected to boost the growth in
GDP both directly, and indirectly through multiplier effects on private consumption expenditure
and private investment. Higher GDP growth would thereby facilitate buoyant revenue collection
in the medium term, and thereby enable a sustainable fiscal path.

Box 1: Fiscal Policy response to COVID-19 across the globe

The economies across the world have undertaken massive use of fiscal policy measures with an
objective to protect the lives and livelihoods against the health and economic effect of COVID-19
pandemic, to boost the demand and foster the reopening of the economies after the lockdown phase.
The fiscal measures adopted have been diverse, comprising of above the line measures, below the line
measures and contingent liabilities (guarantees, quasi-fiscal operations).
“Above-the-line” measures include those for which full cost is reflected in the fiscal deficit, government
debt, and increased borrowing needs in the short term. These measures include additional spending
(for example, health services and unemployment benefits); capital grants and targeted transfers (for
example, wage subsidies or direct transfers); or tax measures (for example, tax cuts or other relief)
provided through standard budget channels. “Below-the-line” measures are defined as generally
involve the creation of assets, like equity injections, loans, asset purchase etc., which may have little
or no upfront impact on the fiscal deficit all although they can later increase debt or reduce liquidity
(IMF Fiscal Monitor April 2020).
The composition of various above-the-line measures and other liquidity support measures announced
by the governments in response to the COVID-19 pandemic, as of September, 2020, may be seen
in Figure 5 and Table 3. These estimates by IMF show that Government of India announced above-
the-line measures equivalent to 2.2 per cent of GDP and other liquidity support measures of around
5.3 per cent of GDP up to September, 2020. It may be noted that additional fiscal measures equivalent
to 1.7 per cent of GDP were introduced by the Government of India in October & November 2020
(See Box 2). Although India’s measures were smaller than those of other developed countries, they
were successful in facilitating a recovery in the economy. This also leaves India with a greater elbow
room to deploy fiscal resources in the future.