Impact of Covid-19 on Indian Economy: An Analysis of Fiscal Scenarios

Amidst the economic slowdown triggered by the outbreak of the Covid-19 pandemic in India there have been many demands for the government to announce a large fiscal stimulus to support the economy. Economic growth and tax revenues remain uncertain in 2020-21 making it challenging for the government to finance any addition to the fiscal deficit. This paper finds that in baseline scenario, assuming a 5% contraction in real GDP and a 14.4% contraction in net tax revenue, fiscal deficit of the central government will be 6.2% of GDP.