Core industries grew 3.8 per cent in Dec 2021; fiscal deficit at 50.4 per cent of FY22 target in April-Dec 2021

Aided by a strong show on both tax revenues and non-tax revenues, the Centre’s fiscal deficit for the first nine months came in at ₹7.59 lakh crore, which is just 50.4 per cent of the budgeted fiscal deficit of ₹15.06 lakh crore for 2021-22.

This is a clear pointer that the overall fiscal deficit for the current fiscal may only see a modest overshoot to the budgeted level even after factoring in the anticipated mega LIC initial public offering (IPO) that could fetch atleast ₹ 75,000 crore in capital receipts for the Central exchequer.

In April-November 2021, the fiscal deficit had touched 46.2 per cent of the full-year target.

This latest fiscal deficit number came a day before Finance Minister Nirmala Sitharaman is due to present her Budget for 2022-23. it may be recalled that in the first nine months of the previous fiscal (FY 2020-21), the fiscal deficit had amounted to 145.5 per cent of the target for the full year.

Meanwhile, the eight core industries’ output grew 3.8 per cent in December 2021, higher than 0.4 per cent in December 2020 and 3.4 per cent in November 2021, an official release showed. The Centre has also said that core industries’ output for April-December 2021 grew 12.6 per cent as compared to contraction of 9.8 per cent in the same period in the previous year. Also, the final core industries’ output growth for September 2021 was revised upwards to 5.4 per cent from 4.4 per cent earlier.

GDP revision

In its first revised estimates of GDP for 2020-21, the National Statistical Office (NSO) on Monday said that the Indian economy shrank in that year by 6.6 per cent, primarily due to Covid-19 pandemic and nationwide restrictions imposed by government.

It may be recalled that the provisional data released by the government in May 2021 had said that GDP had contracted by 7.3 per cent in 2020-21. 

“Real GDP or GDP at constant (2011–12 ) prices for the year 2020–21 and 2019–20 stands at ₹135.58 lakh crore and ₹145.16 lakh crore respectively, showing a contraction of 6.6 per cent during 2020–21 as compared to growth of 3.7 per cent during 2019-20”, the NSO said in the revised national account data released on Monday.

Experts’ take

Madan Sabnavis , Chief Economist, Bank of Baroda, said that core sector growth of 3.8 per cent indicates growth is still fragile. Growth in power and mining does show production is on though lockdown in services affected demand to an extent. “ I expect IIP growth for December to be 3-3.5 per cent”, he said.

Aditi Nayar, Chief Economist, ICRA, said that despite a spike in capital spending in December 2021, only half of the budgeted fiscal deficit was actually incurred by the Government of India in 9M FY2022, boosted by the healthy tax and non-tax revenues. 

“Presuming that the LIC flows materialise in FY2023 amidst back-ended spending, we expect the Government of India to report a fiscal deficit of ₹16.6 trillion or 7.1 per cent of GDP in FY2022, in spite of revenue receipts surpassing the budgeted level by a robust margin of ₹2.25 trillion”, she said.

On core sector data for December 2021, she highlighted that the December 2021 print at 3.8 per cent saw improvement as the impact of heavy rains eased and was over 3.4 per cent in November 2021 , while remaining considerably lower than the 8.4 per cent expansion seen in October 2021.

“Similar to the eight core industries, the December 2021 YoY performance of many high-frequency indicators has trailed the respective growth recorded in October 2021. Accordingly, we expect the IIP to report a feeble rise of less than 2 per cent on a YoY basis in that month, and print below the expansion displayed by the core sector for the fourth consecutive month”, Nayar added.

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