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Government receipts grow more than one-fourth in Oct’21

Spending up just 10% YoY in Oct’21

* The gross receipts of the central government grew 26.4% YoY in Oct’21 (v/s 54.4% YoY in Sep’21) on account of nearly double the non-tax revenues and 17% YoY growth in gross tax receipts in Oct’21 (slower v/s 50% YoY growth in Sep’21). While growth in indirect tax collections remained strong, growth in direct tax was the lowest in the past seven months, weighed by a contraction in corporate tax collections during the month.

* On the back of a 16.8% YoY contraction over Apr–Oct’20, gross tax collections surged 80.7% YoY to INR13.6t over Apr– Oct’21, accounting for 61.6% of FY22BE – compared with just INR8.8t or 36.1% of BE last year and an average of ~47% of BEs collected in the corresponding months of the previous three years (FY18–20). On a two-year CAGR basis, gross tax collections grew 13.9% YoY during Apr–Oct’21 (v/s 13.5% YoY over Apr–Sep’21).

* Despite the contraction in corporate taxes in Oct’21, strong collections in 1HFY22 still led to growth of 91.6% YoY to INR3.3t during Apr–Oct’21. Personal income taxes also grew strongly by >50% YoY during the corresponding months. Consequently, direct taxes grew 71% YoY during Apr–Oct’21, accounting for 58% of FY22BE (v/s only 29% of FY21BE achieved during these months last year).

* The gross receipts of the government, therefore, grew sharply by 81% YoY to INR12.8t (64.7% of FY22BE v/s INR7.1t or 31.5% of FY21BE). On a two-year CAGR basis, total receipts surged 17% YoY during Apr–Oct’21 (v/s 14.6% YoY during Apr–Sep’21).

* Total government expenditure, on the other hand, grew at three-month lows of 10.3% YoY to INR18.3t during Apr– Oct’21, accounting for 52.4% of FY22BE, only marginally lower than 54.6% of FY21BE or INR16.6t during Apr–Oct’20. Growth came from 28.3% YoY growth in capital expenditure and 7.5% YoY growth in revenue expenditure during the months. With this, the government has achieved only 46% of the budgeted (FY22BE) capex target, lower than 48% achieved by this time last year and the lowest in the past nine years.

* As a result of strong growth in receipts vis-à-vis slower growth in expenditure, the government’s fiscal deficit during Apr– Oct’21 stood at INR5.5t. This accounts for only 36.3% of FY22BE v/s INR9.5t or 119.7% of FY21BE achieved during Apr– Oct’20 (as a result of a collapse in receipts and higher spending in the wake of the global pandemic).

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