Amid grim fiscal outlook, this 'act of god' could salvage Sitharaman's Budget

If the Finance Commission recommends a smaller tax share for states, the Centre will get more money. On what that would do to 'cooperative federalism', you don't need to guess, writes T N Ninan

The Budget-making process will soon get under way in the finance ministry. The fiscal outlook is the grimmest in at least three decades, and the challenges probably without precedent. Non-debt revenue in the previous two years (2018-19 and 2019-20) grew slower than nominal GDP (actual growth plus inflation). This year’s nominal GDP will at best match last year’s Rs 204 trillion, with inflation neutralising the drop in real numbers. The government’s non-debt revenue is unlikely to match that, since in the first half of the year it seems to have run at barely two-thirds of last year’s level — that is,