Finance Minister Nirmala Sitharaman (File image: Reuters)
The centre’s fiscal deficit at the end of August stood at Rs 8.70 lakh crore, or 109.3 percent of the 2020-21 budget estimate of Rs 7.96 lakh crore, official data released by the Controller General of Accounts showed. This compares to 78.7 percent for the same period last year.
Finance Ministry officials admit that the budget estimates for fiscal deficit (of 3.5 percent of GDP) no longer hold due to the COVID-19 pandemic and the economic slowdown, but the government is reluctant to issue fresh estimates for the year given the uncertainty around the trajectory of the pandemic or when it will end.
The latest data showed that the revenue situation continues to remain stressed.
Net tax revenue for April-August was Rs 2.84 lakh crore, or 17.4 percent of the full-year target compared with 24.5 percent for the same period last year. Non-tax revenue was 22.4 percent compared with 63.4 percent at the end of August 2019, while non-debt capital receipts, which includes divestment, was just 3 percent compared with 15.2 percent.
Total revenues at the end of August 2020 were Rs 3.77 lakh crore, or 16.8 percent of the budgeted estimate of Rs 22.46 lakh crore, compared with 29.8 percent for the same period last year.
“Five months of data reveal a sordid tale. On a year-to-date basis, the contraction in revenue receipts remained uncomfortably deep at 38.6 percent in April-August 2020, whereas the growth in revenue expenditure stood at a moderate 7.1 per cent, and capital spending slipped into a de-growth of 1.3 per cent,” said Aditi Nayar, Principal Economist with ICRA.
Revenue expenditure for April-August was Rs 11.1 lakh crore, or 42.3 percent of the full-year budget estimates, nearly the same level as last year. Capital expenditure was Rs 1.34 lakh crore or 32.6 percent of the full-year target compared with 40.3 per cent for the same period last year.
Total expenditure at the end of August was Rs 12.48 lakh crore, or 48 percent of the total budget size of Rs 30.4 lakh crore, compared with 42.2 percent at the end of August 2019.
“In the month of August 2020, revenue and capital spending recorded a double-digit contraction, which may reflect the impact of the expenditure management measures that had previously been put in place,” Nayar said.
While the government has put the clamps of administrative expenditure, Finance Minister Nirmala Sitharaman has assured repeatedly that there will be no compromise on capital expenditure by the centre and the state-owned companies.
However, data showed the centre’s capital expenditure of Rs 22,598 crore in August was the lowest among all months so far this year. The highest monthly capex outlay by the centre this fiscal year was Rs 33,067 crore in June.
“We project the GoI’s net tax revenues, non-tax revenues and disinvestment proceeds to together fall short of the FY2021 budget estimates by an alarming Rs 6 lakh crore. However, the expenditure would be augmented by the fiscal support announced by the Centre under the Aatma Nirbhar Bharat schemes, as well as the cash outgo for other items included in the supplementary demand for grants,” Nayar said.
Nayar said the centre’s fiscal deficit may spike to Rs 14 lakh crore in FY2021 from the budgeted Rs 8 lakh crore. “A further expansion in the GoI’s borrowing calendar for H2 FY2021 of at least Rs 1.1 lakh crore above the current estimate of Rs 5 lakh crore is inevitable, even if no further fiscal support measures are announced,” she said.