It may be noted the government ended up reporting a deficit of 4.6% of GDP in FY20, sharply higher than 3.3% projected.

The Centre’s fiscal deficit during the first two months of this fiscal stood at Rs 4.66 lakh crore or 58.6% of the Budget Estimate (BE) of Rs 7.96 lakh crore as against 52% of the respective annual target in the last fiscal , according to data released by the Controller General of Accounts (CGA).

On the receipts side, shortfalls occurred in both tax and non-tax inflows. Net tax receipts (after mandatory transfers to states) declined 71% to Rs 33,850 crore in the first two months of FY21 against the required growth rate (BE FY21 against FY20 actuals) of 21%. Non-tax revenues declined 62% in April-May this fiscal compared with the required growth rate of 18% to achieve budget target this fiscal. Non-debt capital receipts declined by 73% during the first two months of this fiscal as against a required growth rate of a whopping 228% to meet the budget target this fiscal.

The year-on-year growth in the Centre’s total budgetary expenditure fell 0.2% year-on-year to Rs 5,11,841 crore in April-May 2020 compared with a growth rate of 21% in April.

The Centre’s position would still better than what it would have been without expenditure curbs imposed on various departments due to drastic fall in assorted revenues, including the principal stream of taxes. It may be noted the government ended up reporting a deficit of 4.6% of GDP in FY20, sharply higher than 3.3% projected.

Given the massive shortfall in tax revenues and additional fiscal burden due to the recently announced fiscal package, analyst said the actual fiscal deficit for FY21 could be 7-8% of GDP if overall budget expenditure for the year is not compressed. The fiscal deficit was projected to be 3.5% in FY21 in the Budget presented on February 1, prior to outbreak of Covid-19 pandemic.

However, even amidst rising concerns over a big slippage in tax revenue, the quality of spending has not been affected very adversely. Budgetary capex grew by 16% y-o-y in the first two months of this fiscal, lower than 22% growth required to meet the full year target. However, revenue expenditure has declined 2% in April-May y-o-y this fiscal as against a 12% growth estimated for the full year.