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Gross receipts remain strong during Apr-Jul’21…

…but spending contracted by ~5% YoY during the corresponding months

* On the back of a 29.5% YoY contraction in Apr-Jul’20, gross tax collections grew sharply (83.1% YoY) in Apr-Jul’21 to INR7t, accounting for 34.6% of FY22BE, as compared to 10.4% of FY21BE and an average of ~19% of BE during the corresponding months of the previous three years. In Jul’21 alone, gross tax collection grew by nearly 50% (the slowest in the last four months). On a two-year CAGR basis, gross tax collections grew by 13.6% YoY during Apr-Jul’21.

* While direct taxes eased a tad due to lower corporate as well as income tax collections in Jul’21, indirect tax collections came in marginally higher during the month. While the former stood at INR3.1t (27.7% of FY22 BE), the latter came in at INR3.9t (35.1% of FY22BE) during Apr-Jul’21.

* Non-tax revenue collection grew 34.1% YoY in Jul’21 as against ~150% YoY growth in Jun’21 (which was due to a low base in Jun’20). The government has received close to one-third of its full-year non-tax receipts target, which is driven entirely by dividend transfers from the RBI.

* Total receipts of the government grew a whopping 193.4% YoY to INR6.8t in Apr-Jul’21 (34.6% of FY22BE, marginally higher than the previous peak of 33.2% of FY11BE). On a two-year CAGR basis, the government’s receipts have grown sharply by 30.8% YoY during Apr-Jul’21.

* On the contrary, the government’s total expenditure contracted by 4.7% YoY during Apr-Jul’21 to INR10t, 28.8% of FY22BE, but lower than 34.7% of FY21BE. The contraction was on account of a 23.3% YoY decline seen in Jul’21 alone, which was led by a dip in revenue and capital spending in Jul’21. On a two-year CAGR basis, total spending grew by only 3% YoY during Apr-Jul’21.

* Up to Jul’21, the government achieved only 23.2% of its capex target for FY22BE, lower than the 27.1% achieved in FY21BE and the lowest since it achieved 20.3% in FY10.

* As a result of the strong growth in receipts vis-à-vis a contraction in expenditure, the government’s fiscal deficit during Apr-Jul’21 stood at INR3.2t (only 21.3% of FY22BE).

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