Fiscal deficit percentage of GSDP of Bihar as per budget 2020-21 is?

Correct option is A

The Correct Answer is (A) 2.97%

Explanation:

In the Bihar Budget 2020–21, the fiscal deficit was targeted at ₹20,374 crore, which was 2.97% of the Gross State Domestic Product (GSDP). This figure was within the permissible limit set by the Fiscal Responsibility and Budget Management (FRBM) Act, which allows a fiscal deficit up to 3% of GSDP. However, due to the economic impact of the COVID-19 pandemic, the revised estimates for the fiscal deficit were significantly higher. The revised fiscal deficit for 2020–21 was estimated at 6.77% of GSDP, reflecting increased borrowing to meet the state's expenditure needs during the pandemic.

Information Booster:

1. Fiscal Deficit Definition: The fiscal deficit represents the difference between a government's total expenditure and its total receipts (excluding borrowings). It indicates the total borrowing requirements from all sources.

2. FRBM Act Compliance: The FRBM Act sets targets for fiscal deficit to ensure fiscal discipline. States are required to maintain their fiscal deficit within 3% of GSDP, with certain exceptions.

3. Impact of COVID-19: The pandemic led to a decline in revenue receipts and an increase in expenditure, necessitating higher borrowings and resulting in a higher fiscal deficit.

4. Revised Estimates: Revised estimates reflect the updated financial situation based on actual data and revised projections, often differing from the initial budget estimates.

5. Borrowing Requirements: A higher fiscal deficit indicates increased borrowing by the state, which can affect its debt sustainability and future fiscal policies.

6. Economic Implications: Sustained high fiscal deficits may lead to higher interest payments, crowding out private investment, and potential downgrades in credit ratings.

7. Policy Measures: To manage fiscal deficits, states may implement austerity measures, enhance revenue collection, or restructure expenditures.