Fiscal Deficit For April-May At Just Over 8% Of Budget Estimate

Indian two thousand and five hundered rupee notes arranged for photogaph. (Photographer: Dhiraj Singh/Bloomberg)

The second wave of Covid-19 infections did not have as debilitating an impact on government finances as the first wave, suggests government account data for May released by the Controller General of Accounts.

Higher tax and non-tax revenue, alongside slightly lower expenditure helped improve government finances.

The April-May fiscal deficit stood at Rs 1.23 lakh crore, or 8.2% of the budget estimate. Last year, the fiscal deficit for the two months was at 59.6% of the budget estimate.

The government has budgeted for a fiscal deficit of 6.8% of GDP in FY22, although economists see a risk of slippage due to a recent increase in food transfers.

Benefitting from a jump in tax and non tax receipts amidst a contraction in revenue expenditure, the Government of India's fiscal deficit was limited to Rs. 1.2 lakh crore in April-May 2021, less than 30% of last-year's level of Rs. 4.7 lakh crore recorded during the nationwide lockdown.

Aditi Nayar, Chief Economist, ICRA

The April-May revenue deficit stood at Rs 65,023 crore, or 5.7% of the budget estimate. Last year, the revenue deficit for the two months was at 67.6% of the budget estimate.

Total revenue receipts in the April-May 2021 period stood at Rs 3.5 lakh crore, or 19.6% of budget estimate. In the same period last year, total revenue receipts were at 2.2% of budget estimate.

Net tax revenue of Rs 2.33 lakh crore was collected during the first two months of the fiscal, which is 15.1% of the budget estimate. The tax revenue for these two months is 685% higher than FY21, when the economy was at a near standstill. It is also 200% higher than FY19.

In a release on June 16, 2021, the government had said direct tax collections in the first two-and-a-half months of 2021-22 were at Rs 1.86 lakh crore, nearly double the amount collected in the same period last year.

Non-tax revenue also jumped to Rs 1.16 lakh crore, or 47.9% of the budget estimate. This may be on account of the higher surplus payout from the RBI.

Together, higher tax and non-tax revenues supported the government's fiscal position.

Gross tax revenue for April-May 2021 stood at Rs 3.12 lakh crore compared with Rs 1.26 lakh crore in the same period last year. This includes Rs 1.7 lakh crore collected in April and Rs 1.4 lakh crore in May.

Among key tax categories:

Corporation tax collections stood at Rs 43,454 crore compared with Rs 16,981 crore in the same period last year. Month-on-month, collections in this category were down 66%.
Income tax collections stood at Rs 75,381 crore in April-May compared with Rs 35,726 crore a year ago. Month-on-month, collections were lower by 42%.
Union excise duty collections stood at Rs 36,963 crore in April-May 2021 compared with Rs 10,956 crore in the same period last year. For April, excise duty collections were listed at Rs 154 crore, while for May they were reported at Rs 36,809 crore.

May 2021 tax collection of Rs 1.4 lakh is very high relative to even the pre-Covid levels of Rs 0.9-1.0 lakh crore for the month of May in 2017-2019, said Nayar.

Total expenditure for the first two months of the fiscal stood at Rs 4.77 lakh crore, or 13.7% of budget estimate. Last year, the government spent 16.8% of its budget expenditure in these two months.

Revenue expenditure stood at Rs 4.15 lakh crore, or 14.2% of budget estimate, compared to 17.4% in the same period last year.
Capital expenditure stood at Rs 62,961 crore, or 11.4% of the budgeted amount.