Source: Business Standard, Sept 22, 2017
The government is considering increased spending in order to revive the economy and is open to allowing the fiscal deficit to widen beyond its target for the year. A stimulus package in the range of Rs 40,000-50,000 crore is being discussed in the government, though these figures could not be immediately confirmed.
Back-of-the-envelope calculations show that a Rs 40,000-crore increase in capital spending could lead to a fiscal deficit of 3.5 per cent of the gross domestic product, against the Budget estimate of 3.2 per cent. Assuming the budgeted total revenue figure for 2017-18 remains constant, for each additional spending of Rs 10,000 crore, the fiscal deficit as a percentage of GDP roughly increases by a little less than 0.1 per cent.