India’s fiscal deficit in April-May stood at 8.2 per cent of the budget estimates (BE), as compared to 59 per cent in the same period last year. The deficit was less 30 per cent less of last-year's level of Rs. 4.7 trillion amid the nationwide lockdown to contain the coronavirus.
The better numbers are on due to a jump in tax and non-tax revenues and the government keeping expenditure under control during the period. Economists have said the defict it may rise over higher outlay on free food and fertilisers subsidy and other outlays announced by Finance Minister Nirmala Sitharaman on Monday as part of an economic relief package.
According to the government’s statistics office, fiscal deficit in April and May was at Rs 1 trillion, making the amount 8.2 per cent of the budget estimate. Revenue deficit at Rs 65,023 crore or 5.7 per cent of the BE, Net tax revenue at 15.1 per cent, stood at Rs 2.33 lakh crore.
The government's total expenditure during April-May was Rs 4.77 trillion or 13.7 per cent of the budget estimates.
“The fiscal deficit has been quite impressive at just 8.2 per cent of target as against 59 per cent last year. Considering that this year too there was a lockdown the performance has been commendable. More so, as compared with FY20 too, it was lower as the deficit was 52 per cent of the target. This is mostly led by tax revenues which have been better as was borne by Goods and Services Taxes in April. Even the non tax revenue got in the big ticket from Reserve Bank of India," said Madan Sabnavis, cheif economist, CARE Ratings.
“After a sharp growth in April 2021, capital spending contracted by a considerable 41 per centin May 2021 suggesting that the widening state-level restrictions necessitated by the second covid surge, had an impact on activity," said Aditi Nayar, chief economist, ICRA.
Given the moderate growth of 9.5 per cent embedded in the government FY2022 Budget Estimates for gross tax revenues (relative to the provisional actuals for FY2021), relative to our expectation of a nominal GDP expansion of 15-16 per cent in the current fiscal, we do not foresee a material undershooting of the targeted tax collections, even with some eventual reduction in excise duty on fuels, Nayar added.
Besides, central government spending was under control for the usual subsidy payments for previous year happening in April-may did not take place this time as the amounts were subsumed in the Budget. Therefore outflow from department of food was lower.
Also compared with last year NREGA was lower as seen in outlay of the ministry for rural development. Fertilizer subsidy was also lower, which could go up in June as Finance Minister Nirmala Sitharaman early this week announced 15,000 crore additional fertiser subsidy, added Sabnavis.
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