Government investments fell by one-third in Q2, while aggregate fiscal deficit stood at 15% of the GDP in the first half of the fiscal year, Motilal Oswal in its latest report has said.
Receipts and spending of states also declined significantly. Based on the monthly accounts for 15 states -- together accounting for 68% of all states -- states' receipts declined 17.9% YoY in Q2, while spending contracted 12.1% YoY.
Accordingly, states' fiscal deficit increased to Rs 1.5 lakh crore in Q2 and Rs 3.6 lakh crore, or 4.2% of GDP, in 1HFY21.
Total tax receipts of states, including the centre's devolution, fell 12.1% YoY, non-tax revenue receipts shrank 21.2% YoY, and grants from the Centre declined 31.3% YoY in Q2. Within states' taxes, collections of stamp duties and registration charges declined marginally at 1% YoY.
The latest numbers suggest states' revenue expenditure declined 9.3% YoY in Q2, while capital spending contracted 30% YoY, marking the fifth contraction in the past six quarters. Interest payments grew 2.3% YoY, but salaries and wages (based on 13 states) fell 1.1% and pensions shrank 16.6% YoY in Q2.
Of the 15 states, only Haryana posted a fiscal surplus in Q2, while it was almost balanced for Odisha.
The fiscal deficit was the highest for Andhra Pradesh at 92% of actual receipts, followed by Rajasthan at 44% of receipts in Q2. Andhra's fiscal deficit was 123% of receipts in H1, followed by Kerala at 85% and Telangana at 68%.
On combining finances of the Centre and states, total receipts declined 19.3% YoY in Q2, while spending by the Centre shrank 10.5%.
"All in all, with government Capex declining sharply, corporate Capex likely to have remained weak and household investments improving in Q2, India's total investments may have declined 15-20% YoY in Q2, following a 47% YoY drop in Q1," the Motilal Oswal report stated.