Fiscal deficit in Q1 at 18.2% of BE, lowest since FY11

Our Bureau, New Delhi | Updated on July 30, 2021

Macro-economic management has to be integrated in its monetary, fiscal and prices and incomes policies and not work in silos   -  Getty Images/iStockphoto

Helped by higher surplus transfer from RBI; tight rein on expenditure

The Finance Ministry on Friday reported a fiscal deficit of 18.2 per cent of the Budget Estimate (BE) for the April-June quarter, the lowest since 2010-11.

The surplus from the Reserve Bank of India boosted Centre’s receipts to over ₹5.47-lakh crore, which is 27.7 per cent of the BE, while expenditure at over ₹8.21-lakh crore was 23.6 per cent of the BE. Net tax collection exceeded ₹4.12-lakh crore while non-tax revenues totalled ₹1.27-lakh crore. In fact, the RBI payout in May boosted non-tax revenue that has already crossed the half-way mark of the full-year BE in the three-month period.

During the three-month period, the revenue expenditure (such as subsidy, interest outgo, salary and pension) declined 2.4 per cent, which absorbed the 26.3 per cent expansion in capital outlay and net lending, resulting in the total expenditure remaining virtually flat.

Govt spending

Aditi Nayar, Chief Economist of ICRA, feels the subdued rise in the government’s spending can dampen the pace of GDP expansion in the first quarter of 2021-22. Given the moderate 9.5 per cent growth target of the Centre’s gross tax revenues (relative to FY21), experts do not see a material undershooting of the targeted tax collections, even with some eventual reduction in excise duty on fuels. Moreover, the transfer of surplus by the RBI in FY22 has been higher than that budgeted.

“This provides a cushion to absorb the modest net cash outgo of ₹23,670 crore under the First Supplementary Demand for Grants, as well as some step-up in the outlay for vaccine procurement above the budgeted ₹35,000 crore, which may be necessary to achieve early availability of imported vaccines,” Nayar said.

The government has set a fiscal deficit target of ₹15.06-lakh crore (6.8 per cent of GDP) for FY22. Achieving this will depend upon two things: Actual disinvestment proceeds and expenditure on possible stimulus. “At present, we expect the Centre’s fiscal deficit to print at ₹16.1-16.3-lakh crore in FY22, overshooting the BE,” Nayar said.



Published on July 30, 2021

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