State’s overall deficit set to decline in FY20: SBI Economist

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Economists at State Bank of India (SBI) said States have managed to contain fiscal deficit at the aggregate level for FY20, but expressed concerns over compression in capital expenditure.

Key Facts:

  • The states in India have been able to contain fiscal deficit, however it has been possible due reduction in Capital Expenditure.
  • There has been mismatch in the budgeted fiscal deficit and revised fiscal deficit for the financial year. However, the actual fiscal deficit is closer to budgeted fiscal deficit number.
  • The report has referred to this problem as ―missing muddle‖

About Missing muddle:

  • Term ing this as the problem of a “missing muddle,” the economists said this is causing problems for the markets in its understanding of the fiscal math.
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  • The Budget is presented on 1 st Feb every year before the completion of the financial year (April 1- Mar 31). Hence, it presents the revised estimates for the current financial year and estimates for the next financial year. Along with it, it also presents the actuals of the previous financial year. e.g the budget presented on 1 st Feb 2019 would contain the following:
    1. Revised Estimates for the Current Financial year (April 1, 2018- Mar 31, 2019)
    2. Estimates for the next Financial Year ( April 1, 2019- Mar 31, 2020)
    3. Actuals of the previous financial Year ( April 1, 2017- Mar 31, 2018)

Source:The Hindu



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