At Rs 8.21 trn, April-July fiscal deficit exceeds FY21 budget estimates

With GDP for April-June also in, it can be calculated that fiscal deficit for Q1FY21 was 17.4% of nominal GDP. FM Sitharaman had pegged fiscal deficit for the year at 3.5% of GDP in 2020-21 Budget

The stress on revenue resources due to Covid-19 continued showing on the Centre’s books. For April-July, the Centre’s fiscal deficit stood at Rs 8.21 trillion, or 103 per cent of 2020-21 budget estimates of 7.96 trillion, compared to 77.8 per cent for the same period last year, official data showed on Monday. In 2019-20, fiscal deficit had crossed 100 per cent of the full year BE by October-end.

With gross domestic product (GDP) data for the April-June quarter also released on Monday, it can now be calculated that fiscal deficit for the first quarter of 2020-21 came in at 17.4 per cent of nominal GDP. Finance Minister Nirmala Sitharaman had pegged the fiscal deficit for the year at 3.5 per cent of GDP in the 2020-21 Union Budget.

Finance Ministry officials admit that the budget estimates no longer hold due to the pandemic and the nationwide lockdown, but the government is reluctant to issue fresh estimates for the year given the uncertainty around the trajectory of the pandemic or when it will end.

For April-July, tax and non-tax revenues continued getting hit due to slowdown in economic activity. As per data by the Controller General of Accounts, net tax revenue was 12.4 per cent of the FY21 BE compared with 20.5 per cent for the same period last year. Non tax revenue was 6.4 per cent compared to 14 per cent, and non-tax capital receipts, which includes divestment, was 2.4 per cent compared to 14.2 per cent.

Total revenue receipts for April-July stood at Rs 2.33 trillion, or 10.4 per cent of BE of Rs 22.45 trillion, compared to 19.2 per cent for the same period last year.

“The fiscal position of the government for the first four months of the year is reflective of the effects of the shutdown. The major problem for the government has been on the revenue side. On expenditure side higher allocations have been made in agriculture, rural development, fertilizers, defence, and roads. The nagging part is on revenue which has fallen short in all areas,” said Madan Sabnavis, Chief Economist, Care Ratings.

The centre continued its expenditure push. Revenue expenditure for April-July came in at 35.8 per cent of full year budget estimates, compared with 34.3 per cent for the same period last year. Capital expenditure came in at 27.1 per cent compared with 31.8 per cent. In absolute terms though, capex in April-July was Rs 4,244 crore higher than the same period last fiscal.

Total expenditure for April-July was Rs 10.54 trillion, or 34.7 per cent of the total budget size of Rs 30.4 trillion, compared with 34 per cent.

“The financial position of the central government would continue to be strained for the remaining 3 quarter of the financial year 2020-21. With imposition of localized lockdowns in a number of states, economic activity continues to be limited and consequently the government’s revenues. Even with the easing of lockdown demand would be muted,” Sabnavis said.

“On the other hand, the growth in government expenditure is likely to be at this stable pace to support the economy. We expect the fiscal deficit to widen to around 7-8 per cent of GDP in 2020-21 from the budgeted 3.5 per cent,” he said.

(all figures in Rs trillion)	2020-21 Budget estimates	April-July (Figure in % of BE)
Net Tax Revenue	16.36	2.03 (12.4)
Non-Tax Revenue	3.85	0.24 (6.4)
Non-Debt Capital Receipt	2.25	0.05 (2.4)
Total Revenue	22.46	2.33 (10.4)
Revenue Expenditure	26.3	9.42 (35.8)
Capital Expenditure	4.12	1.12 (27.1)
Total Expenditure	30.42	10.54 (34.7)
Fiscal Deficit	7.96	8.21 (103.1)

Source: cga.nic.in