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Central government fiscal deficit at 9.2% of GDP in FY21

Its expenditure was down by more than a quarter in Apr’21

* India’s fiscal deficit came in at INR18.2t – 98.5% of the revised estimate (FY21RE) of INR18.5t. This accounted for 9.2% of GDP in FY21, against the revised estimate of 9.5% of GDP.

* The minor difference is attributable to higher government receipts vis-à-vis higher spending during the year. While the government had budgeted INR16t worth of total receipts, provisional estimates show total receipts at INR17t (105.5% of FY21RE). Additionally, provisional data shows government spending of INR35.1t (101.8% of FY21RE of INR34.5t). Effectively, this implies the receipts target was overshot by INR881b and the spending target by INR609b, leading to lower fiscal deficit worth INR272b.

* While total receipts grew an average of ~58% during Oct’20–Jan’21, they declined ~13% over Feb–Mar’21, despite growth in gross tax revenue. An average of ~43% YoY growth in the center’s devolution to states over Feb–Mar’21 led to lower total government receipts.

* Both direct and indirect taxes were partly attributable to growth in gross tax receipts. Direct taxes came in 2.4% above the revised estimate and Indirect taxes were 10.4% over FY21RE. Growth in indirect taxes was led by custom and excise duty collections, as Goods and Services Tax (GST) posted decline in FY21.

* The government spent ~INR6.9t in Mar’21 alone, the highest ever spending incurred in one month by the central government (previous high was INR3.7t in Dec’20). Additionally, core spending by the government (total spending – interest payments – subsidies) came in at INR2.5t, implying YoY growth of 49%.

* Total spending in FY21 grew nearly one-third, led by growth in both revenue and capital spending. While revenue spending grew 31.4% YoY to INR30.1t, capital spending grew 26.2% YoY to INR4.2t. Nevertheless, revenue spending overshot FY21RE by 2.5% and capital spending was underachieved by 3.3% YoY.

* Separately, gross taxes in Apr’21 were 2.5x the level a year ago – or all-time best of 7.7% of budget estimates (FY22BE) – and total receipts were 5.4x (7.5% of FY22BE). Government spending, on the other hand, fell 26.2% YoY last month (an eight-year low of 6.5% of FY22BE), with 31% decline in core spending. However, government capital spending grew twothirds in Apr’21 (accounting for 8.5% of FY22BE). Consequently, the fiscal deficit was just INR787b in Apr’21 (or 5.2% of FY22BE), the lowest deficit in last 25 years.

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