Former finance secretary Subhash Chandra Garg on Thursday said the government is likely to face a shortfall of around Rs 10 lakh crore in 2020-21 due to the Covid-19 pandemic.
In a blog, Garg said the government's tax and non-tax revenues are likely to decline by around Rs 5 lakh crore, while on the expenditure side additional financing of about Rs 6 lakh crore would be required.
"There is likely to be an additional shortfall of not less than Rs. 10 lakh crores in the financial year 2020-21.
"...The only feasible and the least disruptive measure is to monetise this additional deficit and the RBI to meet this financing requirement," he said. Elaborating on the fiscal situation, the former finance secretary said that indirect taxes, GST, excise duty on petroleum products and customs will under-perform.
"Disinvestment programme is likely to remain grounded for quite sometime resulting into substantial under performance," he said.
Garg pointed out that there is a requirement of a survival package for sustaining the lives of over 10 crore workers who have been rendered jobless. Noting that the options of resorting to household savings or issuing special bonds like COVID bonds are unlikely to be of much help, he said, "Forcing this additional borrowing requirement on banks and other financial institutions is likely to be more counter-productive."
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