The Centre's fiscal deficit rose to 50.4 percent of the FY22 target in April-December 2021, with a huge increase seen in tax collections as well as capital expenditure for the month of December 2021, data released on January 31 by the Controller General of Accounts showed.
In April-November 2021, the fiscal deficit had amounted to 46.2 percent of the full-year target.
The latest numbers on the government's finances come a day before the 2022 Budget is presented in Parliament by Finance Minister Nirmala Sitharaman. The Economic Survey for 2021-22, tabled today, said the Centre was "well on track" to meet its fiscal deficit target of 6.8 percent of the Gross Domestic Product (GDP).
The government's finances are in far better shape this year. In the first nine months of FY21, the fiscal deficit had amounted to 145.5 percent of the target for the full year.
For December 2021, the Centre posted a fiscal deficit of Rs 63,752 crore, down 23.2 percent from December 2020. This took the fiscal deficit for April-December 2021 in absolute terms to Rs 7.59 lakh crores.
The Budget for FY22 had pegged the fiscal deficit for the full year at Rs 15.07 lakh crore.
There were huge movements in the underlying numbers. Total expenditure in December 2021 was 19.4 percent higher from a year ago, led by a massive 74.0 percent increase in capital expenditure to a record of Rs 1.18 lakh crores.
"The substantial capital spending of nearly Rs 1.2 lakh crore in December 2021 is likely to have been augmented by the release of the equity infusion planned for Air India," noted Aditi Nayar, ICRA's Chief Economist.
The government's second supplementary demand for grants had sought Rs 62,057 crore for equity infusion in Air India.
While such a jump in spending should have sharply widened the fiscal deficit, receipts were on the up too. Total receipts of the Centre were up 31.6 percent year-on-year in December 2021, with gross tax revenue 24.0 percent higher at Rs 3.87 lakh crore.
For April-December 2021, total receipts are up 57.1 percent year-on-year at Rs 17.62 lakh crore on the back of a 44.2 percent increase in gross tax revenue. Total expenditure is up 10.6 percent, with capital expenditure up 26.8 percent.
While the fiscal deficit target does not seem to be a concern for the government, other aims - particularly those related to spending - may be stiffer. In the first nine months of FY22, the Centre's capital expenditure amounted to 70.7 percent of the full-year estimate.In comparison, in April-December 2020, capital expenditure was exactly on track at 75.0 percent of the target for FY21. However, this does provide room for the Centre to push its spending without any worries in January-March 2022, with ICRA's Nayar anticipating government spending to record a "robust momentum" in the current quarter, which could "sharply magnify" the fiscal deficit in the quarter.