The fiscal deficit for FY21, according to provisional estimates, was 9.3% of gross domestic product (GDP), lower than the government’s revised estimate of 9.5% in the February budget.
In April FY22, the fiscal deficit was 78,700 crore, a 72% drop from 2.8 lakh crore in year-earlier month, indicating that the impact of the pandemic has been less severe this year.
The FY21 fiscal deficit numbers are based on the first advance estimate of GDP for FY21 that was used in the budget. In terms of the latest National Accounts Statistics released on Monday, the fiscal deficit for FY21 is 9.2% of GDP against 9.4% in the budget. The fiscal deficit is the excess of government spending over revenue that is met through borrowings.
In rupees terms, the fiscal deficit for FY21 was 18.2 lakh crore against 18.48 lakh crore in the revised estimate. The fiscal deficit for FY21 had originally been budgeted at 7.96 lakh crore.
The pandemic and the lockdown imposed to contain the spread severely depressed government revenues in FY21 even as it was forced to spend more to provide relief, causing the fiscal deficit to balloon.
The fiscal deficit was 4.6% of GDP in FY20. In the current fiscal, the government has budgeted a fiscal deficit of 6.8%.
In FY21, total revenue was about Rs 88,000 crore higher than the Rs 16 lakh crore estimated in the revised estimates. Total expenditure exceeded the target of Rs 34.5 lakh crore by about Rs 61,000 crore.
“This (lower fiscal deficit) was mainly due to 5.9% higher net tax revenue collection and 23.9% higher collections of non-debt capital receipts,” said DK Pant, chief economist at India Ratings and Research.
The increased revenue expenditure was on account of the back ended release of food subsidies, according to ICRA chief economist Aditi Nayar.
“The GoI’s food subsidy has overshot the FY2021 RE by 24.3% or Rs 1 trillion, which we believe corresponds to the prepayment of the FCI‘s (Food Corporation of India) liabilities in FY2021 that had earlier been planned to be discharged in FY2022,” Nayar said.
The lower fiscal deficit in April was partly due to a healthy 152% annual increase in gross tax collections to Rs 1.7 lakh crore. A steep 35% fall in revenue expenditure also contributed to the lower fiscal deficit for the month.
The higher-than-budgeted transfer of Rs 99,122 crore by the Reserve Bank of India along with the expedited clearing of FCI dues will cushion the deficit in the ongoing fiscal, experts said.
However, there was a moderate risk that the FY22 fiscal deficit target of 6.8% of GDP could be exceeded as there could be a shortfall in tax revenue and disinvestment receipts due to the second wave, they said.