COVID-19 an ‘Act of God’, financial system to contract this fiscal: Sitharaman

New Delhi, August 27

Finance Minister Nirmala Sitharaman on Thursday mentioned the financial system has been hit by the COVID-19 pandemic, which is an ‘Act of God’, and it’ll see a contraction within the present fiscal.

As per the Centre’s calculations, states can be going through a shortfall of Rs 2.35 lakh crore in GST revenues in 2020-21.

Briefing reporters after the 41st assembly of the GST Council, Sitharaman mentioned the Centre pays the states the compensation which strictly arises out of GST implementation.

In the present fiscal, the compensation requirement of states has been estimated at Rs Three lakh crore, of which Rs 65,000 crore could be funded from the revenues garnered by levy of cess. This leaves a shortfall of Rs 2.35 lakh crore.

The Centre has estimated that of this Rs 2.35 lakh crore, Rs 97,000 crore compensation requirement is because of GST rollout and the remaining is on account of the affect of COVID-19 on the financial system.

“This year we are facing an extraordinary situation that even below 10 per cent approximate estimation you are facing an ‘Act of God’ which might even result in a contraction of the economy…,” Sitharaman mentioned.

Earlier this week, the Reserve Bank had mentioned that the contraction in financial exercise was prone to proceed within the second quarter of the present fiscal as upticks witnessed in May and June seems to have misplaced power following reimposition of lockdowns to include the coronavirus pandemic.

The authorities imposed a nationwide lockdown on March 25 to fight the pandemic. The lockdown was partially lifted after which reimposed by sure states to verify the unfold of the coronavirus infections.

The National Statistical Office is scheduled to launch its estimates of GDP for the primary quarter of this fiscal on August 31.

The development projections for present fiscal by varied businesses present a pointy contraction of the Indian financial system starting from (-)3.2 per cent to (-)9.5 per cent.

India’s GDP development has been slowing even earlier than the outbreak of the pandemic. India’s Gross Domestic Product (GDP) development of 4.2 per cent in 2019-20 was the bottom because the world monetary disaster greater than a decade in the past. — PTI

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