COVID-19 an 'Act of God', economy to contract this fiscal: Finance Minister Nirmala Sitharaman

Finance Minister Nirmala Sitharaman on Thursday said ecomy has been hit by COVID-19 pandemic, which is an 'Act of God', and it will see a contraction in current fiscal.

As per Centre's calculations, states will be facing a shortfall of Rs 2.35 lakh crore in GST revenues in 2020-21.

Briefing reporters after 41st meeting of GST Council, Sitharaman said Centre will pay states compensation which strictly arises out of GST implementation.

In current fiscal, compensation requirement of states has been estimated at Rs 3 lakh crore, of which Rs 65,000 crore would be funded from revenues garnered by levy of cess. This leaves a shortfall of Rs 2.35 lakh crore.

Centre has estimated that of this Rs 2.35 lakh crore, Rs 97,000 crore compensation requirement is due to GST rollout and remaining is on account of impact of COVID-19 on ecomy.

"This year we are facing an extraordinary situation that even below 10 per cent approximate estimation you are facing an 'Act of God' which might even result in a contraction of ecomy...," Sitharaman said.

Earlier this week, Reserve Bank h said that contraction in ecomic activity was likely to continue in second quarter of current fiscal as upticks witnessed in May and June appears to have lost strength following reimposition of lockdowns to contain coronavirus pandemic.

government imposed a nationwide lockdown on March 25 to combat pandemic. lockdown was partially lifted and n reimposed by certain states to check spre of coronavirus infections.

National Statistical Office is scheduled to release its estimates of GDP for first quarter of this fiscal on August 31.

growth projections for current fiscal by various ncies show a sharp contraction of Indian ecomy ranging from (-)3.2 per cent to (-)9.5 per cent.

India's GDP growth has been slowing even before outbreak of pandemic. India's Gross Domestic Product (GDP) growth of 4.2 per cent in 2019-20 was lowest since global financial crisis more than a dece ago. 

(Photo Credit: Twitter/FinMinIndia)