The advisory council to the 15th Finance Commission has discussed the impact of restrictions imposed due to the COVID-19 pandemic on tax revenue and possibilities for establishing a debt consolidation road map.
In the virtual meetings with the Finance Commission on June 25-26, the Advisory Council felt that the impact of the pandemic on the economy and on the fiscal positions of the Union and state governments is still highly uncertain.
"The advisory council also discussed the adverse implications of constraints in the economy on tax revenue collections of the union and state governments. While noting that tax collections can be considerably affected by the pandemic, some members of the council indicated the impact of the pandemic on tax collections may also be asymmetric," an official statement said.
Data released last month showed the central government's fiscal deficit surged to 78 per cent of Budget estimates to Rs 2.79 lakh crore in April as tax revenues slumped on account of the nationwide lockdown.
The Budget for 2020-21 had projected the fiscal deficit at Rs 7.96 lakh crore, or 3.5 per cent of GDP.
The advisory council also discussed implications on the deficits and debt of the general government along with constraints and possibilities for establishing a path for consolidation of public debt, post the pandemic.
"On the expenditure side, governments will have substantial expenditure burden on account of health, support to poor and other economic agent," the members said.
The nationwide lockdown imposed to curb the spread of pandemic has severely impacted the economic activity.
The meeting was chaired by 15th Finance Commission Chairman N K Singh, and attended by all members and senior officials of the Commission. From the advisory council, Chief Economic Advisor Krishnamurthy Subramanian, Sajjid Z Chinoy, Prachi Mishra, Neelkanth Mishra and Omkar Goswami and special invitee Rathin Roy attended the meeting on June 25.
While Arvind Virmani, D K Srivastava, M Govinda Rao and Sudipto Mundle from the advisory council, along with Shankar Acharya and Pronab Sen, attended the meeting on June 26.
"Many analysts and think-tanks have reduced their GDP growth projections for 2020-21. Due to ongoing social distancing measures in place and local level restrictions in many places, supply chains are not yet fully restored, which affects recovery process," it said.