In India, with the pandemic situation still evolving, the growth forecasts by all the agencies have been negative with the median forecasts at close to -10%. The RBI expects the GDP to contract by 9.5% ‘with risks to the downside.
The GDP growth was already in a slowdown phase even in 2019-20. It has registered a growth of 4.1%, which was the lowest in over a decade.
The fiscal situation was even more precarious with the Central Government invoking the escape clause in the FRBM (Amendment) Act of 2018 for two consecutive years that allows the governments to run 0.5% more fiscal deficit than specified in the Act.
On the part of state governments, most of the studies suggest that the fiscal position at the states only deteriorated since 2015-16 despite higher devolution to the states.
In a way, the government entered this pandemic phase with weak global prospects. The first quarter of 2020-21 registered the sharpest decline of -23.9%.