Impact of COVID-19 on public finance

Abstract

Fiscal deficit is a data point which is keenly observed by the economists, government, and the citizens alike. It depicts the financial health of the economy by evaluating the difference between revenues and expenses and then finally looking at it as a proportion of GDP. This year has been different, in multiple ways with the onset of COVID. It has had impact on multiple sectors of the economy, with the GDP and inflation data entering new territories. In the first quarter of the financial year growth was minus 24%. In the same spirit, fiscal deficit has been negatively impacted by the suspension of economic activities for a good part of the year, caused by the COVID-19 virus. There have also been arguments for and against the need to develop some sort of restraint against the fiscal spending. While some state 2020-21 to be an extraordinary year meriting expenditure over and above what was budgeted, others also warn about the long-lasting impacts of fiscal imprudence, if the spending and revenue sources are not attended to. In this light, the Finance Minister Nirmala Sitharaman said she will not let worries about a widening budget deficit stop her from spending more to help an economy that has entered an unprecedented recession.