State Bank of India (SBI) has estimated the real GDP growth for the current financial year at 1.1%. “With the lockdown now being extended till May 3 and simultaneously, the government providing some relaxations from April 20, we estimate the overall loss for FY21 at about ₹12.1 lakh crore or 6% of the nominal GVA (gross value added), taking the nominal GVA growth for entire year to be around 4.2%,” the SBI report, authored by Soumya Kanti Ghosh, group chief economic adviser, SBI, said.
“Nominal GDP for FY21 could be lower/closer to 4.2%, as there is a strong possibility of subsidies outstripping tax collections. However, taking nominal GDP growth at 4.2%, the real GDP growth for FY21 would be around 1.1%,” the report said. The earlier forecast for GDP growth for FY21 was 2.6%.
The report said a 4% slippage in nominal GDP is equivalent to ₹8 lakh crore of fiscal support.
The report suggests that apart from monetisation of deficit, the other option for financing fiscal deficit is to go in for tax-free bonds, as these instruments are good for investors in terms of earning regular, tax-free income while affording tax deductions under the Income Tax Act.
“Considering the current market appetite, we suggest short maturity, tax-free bonds that will be a good hit in the markets,” the report said.
