Macro-economic Framework Statement (MFS) 2020-21

Context: A prediction of rebound in GDP growth from the First Quarter of 2020-21 has been made  by the Macro-economic Framework Statement (MFS) 2020-21.

Macro-economic Framework Statement (MFS) 2020-21

KEY HIGHLIGHTS The Macro-economic Framework Statement (MFS) 2020-21 briefly describes the return path of fiscal consolidation without compromising the needs of investment out of public funds. As per MFS 2020-21, the government has revised the fiscal roadmap in the near term and limited the fiscal deficit to 3.8% of the GDP in RE 2019-20 and 3.5% in 2020-21. The framework statement further notes that the consumer price inflation has remained within the targeted limits set by the Monetary Policy Committee (MPC) of the RBI and the government is expected to return to the glide path of fiscal consolidation in the medium term. As part of the Framework, Finance Minister has proposed a 21% increase in capital expenditure for the FY 2020-21. Level of expenditure has been kept at Rs. 30.42 lakh crores in BE 2020-21, as compared to Rs. 26.98 lakh crores in RE 2019-20. In order to bring an improvement in the physical quality of life, the Government has also announced the National Infrastructure Pipeline (NIP) of projects worth Rs. 102 lakh crores, which would commence in phases from 2020-21 to 2024-25. The Framework states that the Global economic growth is expected to pick up in 2020 which could also support India’s growth. In view of a positive outlook on economic rebound, the MFS predicts the nominal growth of the economy at 10% in FY 2020-21.  According to the MFS, positive prospects for the economy are continuation of structural reforms that will revive growth and expected normalization of credit flow as investment picks up induced by a cut in the corporate tax rate and anticipated transmission of repo rate cuts earlier implemented by the MPC.

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