HYDERABAD: India’s fiscal deficit stood at 8.2 per cent in the first two months of FY22 at Rs 1.23 lakh crore, official data released Wednesday showed.
This is lower than the previous fiscal year when deficit in April and May stood at 59 per cent, but that’s largely due to higher expenditure and lower revenues arising because of the nation-wide lockdown.
In first two months of 2019-20, the fiscal deficit was 52 per cent of the then Budget target. The budget target set for fiscal deficit in FY2021-22 is Rs 11.40 lakh crore.
The latest numbers are also a shade better than last fiscal due to the better-than-expected tax and non-tax revenue, though it’s unclear if the latter has been bumped up due to the higher-than-budgeted surplus from the RBI.
For instance, net tax revenue in April-May is at Rs 2.33 lakh crore, which is 15 per ent of the target for the current financial year. May’s tax revenue at Rs 1.4 lakh crore is high, relative even to pre-Covid levels of Rs 0.9-1.0 lakh crore in May 2017-2019.
The ongoing expenditure compression has also helped lower fiscal deficit.
Monthly data released by the Comptroller & Auditor General (CGA) shows total expenditure at Rs 4.78 lakh crore, which is 13.7 per cent of the target.
For the same period last year, the government had spent 16.8 per cent of the budgeted traget.
The biggest setback, though, is the reduction in capital spending, which shot up in April only to contract in May by a considerable 41 per cent.
According to Aditi Nayar, Chief Economist, ICRA, “the higher than budgeted transfer of surplus by the RBI in 2021-22 and prepayment of the FCI’s liabilities of about Rs 1 lakh crore in FY2021, provide a cushion of around Rs 1.5-1.6 lakh crore. This should be adequate to cover the costs related to the free foodgrains and enhanced fertiliser subsidy of Rs 1.1 lakh crore, and the aforesaid fresh outlay of Rs 0.5-0.7 lakh crore for FY22 for the relief package”.
In all, the government hopes to reduce fiscal deficit in 2021-22 to 6.8 per cent of GDP from 9.2 per cent last year.
Officials maintain that the target won’t be breached, but analysts expect that FY22’s fiscal deficit will overshoot the budget estimates of Rs 15.1 lakh crore, though much will depend on the disinvestment target of Rs 1.75 lakh crore.
Rs 1.23L cr Fiscal deficit in Apr-May 2021
Rs 11.40 L cr Fiscal deficit target for FY22
Spending restricted for some ministries
Given the Covid Situation and anticipated cash situation for the government, the finance ministry has restricted the use of funds for certain ministries to 20% of their total 2021-22 allocation in the July-September quarter.