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Central government spending at a 10-month high in Jan’21…

…supported by higher growth in total capital spending

* Gross taxes grew 19.7% YoY in Jan’21, implying a much slower contraction (slowest in 11 months) of 1% YoY during Apr’20-Jan’21. Within gross taxes, while direct taxes declined 2% YoY in Jan’21 (a first in four months), indirect taxes grew one-third last month. On a cumulative basis (FY21 YTD), direct taxes continued to decline, while indirect taxes grew for the second consecutive month.

* Total receipts grew slower by 54% YoY in Jan’21, implying flat government receipts YoY during Apr’20-Jan’21. The government has received INR12.8t so far, or 80% of its FY20RE (revised estimates).

* Total spending by the central government grew to a 10-month high of 45.9% YoY in Jan’21, led by a massive 335.1% YoY growth in capital spending (including loans and advances). Revenue spending too grew by one-fourth (its third consecutive growth) last month.

* Total capital expenditure is the addition of capital outlays and loans disbursed by the Center. While capital outlays grew 3.4% YoY during Apr’20-Jan’21, loans disbursed rose nearly 5x during the corresponding period.

* Government spending during Apr’20-Jan’21 grew at a six month high of 11% YoY to INR25.2t (73% of FY21RE). The government seems to also have achieved 83% of its targeted total capital expenditure for FY21RE.

* While interest growth moderated to 10.1% YoY (the slowest growth in five months) in Jan’21 from 11.3% YoY a month ago, total subsides (food + fertilizer + fuel) grew for the first time in 10 months, albeit marginally by 0.2% YoY. Growth was led by almost one-fourth growth in fertilizer subsidy while that of food (despite government’s massive food security program under the AtmaNirbhar Bharat Abhiyaan package) and fuel continued to decline.

* Rural spending grew 34.1% YoY during Apr’20-Jan’21 as against 27.9% YoY growth achieved during Apr’19-Jan’20.

* Fiscal deficit stood at INR12.3t up to Jan’21, 66.8% of FY21RE and 91% of our expectation of INR13.5t in FY21.

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