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Fiscal deficit for the April-July period of FY22 touched 21.3 per cent of budget estimate (BE), hitting the lowest level in nine years. Lower deficit eases some pressure on the interest rate.
According to the monthly account data prepared by the Controller General of Accounts (CGA), released on Tuesday, the net tax collection touched close to the ₹5.30 lakh crore mark, which is 34.2 per cent of the budget estimate (BE). This was just 12.4 per cent during the corresponding period of last fiscal. However, total expenditure stood at just 28.8 per cent of BE, which comes around ₹10 lakh crore. Last year, the total expenditure was 34.7 per cent of BE during the corresponding period.
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Policy action for recovery has to be carefully calibrated: RBI chief
Ever since the pandemic began, we have endeavoured to nurture and revive the process of growth: Shaktikanta DasExpenditure (revenue and capital) contracted 4.7 per cent during the April-July period as against a growth of 11.3 per cent seen during the corresponding period of last fiscal. Although capital expenditure grew 14.8 per cent, non-interest revenue expenditure contracted 12.6 per cent as against a growth of 13.4 per cent recorded last year. In fact, non-interest revenue expenditure growth in April-July 2021 stood at 0.99 time, which left economists perplexed.
“Sharp increase in revenue and contractionary non-interest revenue expenditure has resulted in fiscal deficit at end-July 2021 at ₹3.21 lakh crore, lowest in last nine years. India Ratings expects FY22 fiscal deficit to be lower than the budget estimate at 6.6 per cent of GDP,” Devendra Kumar Pant, Chief Economist with India Ratings & Research (Ind-Ra), said.
Aditi Nayar, Chief Economist at ICRA appreciated the step-up in the Central tax devolution to ₹47,540 crore in July from ₹39,175 crore each month, for the first three months. She hoped that if the monthly devolution continues at this pace until February next year, it will boost the cash flows of State governments and reduce the back-ending of such transfers.
Nayar felt that gross tax revenues of ₹22.2 lakh crore can be achieved even with a sizeable 7.5 per cent contraction in the remainder of the current fiscal, which appears unlikely with a deepening of the economic recovery in the ongoing quarter.
Fiscal deficit projection
The higher-than-budgeted transfer of surplus by the RBI in current fiscal and expectation of modest inflows under the newly announced National Monetisation Pipeline would absorb the net cash outgo of ₹23,670 crore under the First Supplementary Demand for Grants and the anticipated step-up in fertiliser subsidy for the rabi season of ₹10,000-15,000 crore.
“With low receipts of ₹8,371 crore so far, it is likely that the disinvestment target of ₹1.75 lakh crore will be missed by a considerable margin, causing the GoI’s fiscal deficit to overshoot the FY22 BE. Moreover, if other major fiscal stimulus measures are announced, and the outlay for vaccine procurement is raised above the budgeted ₹35,000 crore, it could cause the fiscal deficit to widen. At present, we estimate the GoI’s fiscal deficit for the current fiscal at ₹16 lakh crore or 7 per cent of GDP, overshooting the budgeted amount of ₹15.1 lakh crore,” she said.
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