India’s April-October fiscal deficit over 36% of FY2022 target

India’s April-October budgetary fiscal deficit has reached 36.3 per cent of the FY22 target.

As per the data furnished by the Controller General of Accounts (CGA), the fiscal deficit -- the difference between revenue and expenditure -- for the April-October 2021-22 period stood at Rs 547,026 crore, or 36.3 per cent of the budget estimates (BE).

The FY22 deficit has been pegged at Rs15.06 lakh crore.

Besides, the CGA data showed that the fiscal deficit during the corresponding months of the previous fiscal was 119.7 per cent of that year’s target.

The Central government’s total expenditure stood at Rs 1,826,725 crore (52.4 per cent of BE) while total receipts were Rs 1,279,699 crore (64.7 per cent of BE).

ICRA Chief Economist Aditi Nayar said: “We estimate the total expenditure to overshoot the FY2022 BE by Rs 1.3-1.5 trillion, based on the net outgo related to ‘First Supplementary Demand for Grants’, recent enhancement in food subsidy outgo towards the ‘PMGKAY’, increase in fertiliser subsidy for the rabi season, and the likely enhancement in the allocation for the ‘MGNREGA’ and the new export benefit ‘RoDTEP’ scheme.”

“If the proceeds of the BPCL disinvestment and LIC IPO are both not realised in FY2022, the GoI’s fiscal deficit may print at Rs15.8-16 trillion (6.9-7 per cent of GDP), exceeding the BE of Rs. 15.1 trillion.”

India Ratings and Research’s Principal Economist Sunil Kumar Sinha said: “Fiscal deficit in first seven months declined to Rs 201.75 billion in FY22, 36.3 per cent of full year. This is the lowest in last four years in level terms and lowest in last 13 years as percentage of full year’s fiscal deficit. This is due to a combination of high growth in revenue receipts and low revenue expenditure growth.

“While, capex growth so far has been strong in FY22, in relation to budget target, Capex in first seven months has been 45.71 per cent. Corporate tax and custom collection have led revenue receipt growth. India Ratings expects fiscal deficit in FY22 to come in at 6.2 per cent of GDP, lower than the budgeted 6.8 per cent of GDP.”

Fiscal spending: Higher central fiscal spending as well as consumption recovery and healthy monsoon season accelerated India’s Q2FY22 GDP growth rate to 8.4 per cent on a year-on-year basis.

Besides, pent-up demand, higher exports along with a rise in service activity amid further improvement in mobility supported the uptrend.

The accelerated vaccination drive also played a role in this YoY rise as it brightened consumer sentiments.

On a YoY basis, India’s GDP growth rate had fallen by 7.4 per cent during the corresponding period of the previous fiscal. On a sequential basis, the GDP growth rate during Q2FY22 was lower than the rise of 20.1 per cent recorded for Q1FY22. India’s GDP at constant 2011-12 prices has been estimated at Rs 35.73 lakh crore in Q2FY22, as against Rs 32.97 lakh crore in Q2FY21.

“GDP at Constant (2011-12) Prices in Q2 2021-22 is estimated at Rs 35.73 lakh crore, as against Rs 32.97 lakh crore in Q2 2020-21, showing a growth of 8.4 per cent as compared to 7.4 per cent contraction in Q2 2020-21,” the National Statistical Office (NSO) said in its Q2FY22 GDP estimates.

“Quarterly GVA at Basic Prices at Constant (2011-12) Prices in Q2 2021-22 is estimated at Rs 32.89 lakh crore, as against Rs 30.32 lakh crore in Q2 2020-21, showing a growth of 8.5 per cent,” it added.

The GVA includes taxes, but excludes subsidies. In a poll of economists, IANS had on November 29 predicted that based on the consumption recovery, India’s GDP Q2FY22 is expected to grow by anywhere between 7 and 9 per cent.

On year-on basis, there was a sharp increase in expenditure on public administration, defence and other services, which recorded a growth of 17.4 per cent from (-)9.2 per cent in the like quarter of the previous fiscal and 5.8 per cent in Q1FY22.

The Q2GVA for 2021-22 from the agriculture, forestry and fishing sector showed a growth of 4.5 per cent, as against 3 per cent in the corresponding quarter of 2020-21 and 4.5 per cent in Q1FY22.

Similarly, the GVA in Q2FY22 from the manufacturing sector grew 5.5 per cent, as compared to a de-growth of (-)1.5 per cent in the like quarter of the previous fiscal and 49.6 per cent in Q1FY22.

The mining and quarrying sector increased by 15.4 per cent against previous fiscal’s contraction of (-)6.5 per cent and 18.6 per cent in Q1FY22.

“This was mainly due to the sharp increase in public expenditures in the second quarter after conservative spending in the first quarter, as seen by the increase of 8.5 per cent in government consumption expenditures,” said M. Govinda Rao, Chief Economic Adviser at Brickwork Ratings.

As per Suman Chowdhury, Chief Analytical Officer, Acuite Ratings & Research: “What is also encouraging to see is a 10.7 per cent growth in gross capital formation, driven primarily by public capital expenditure although there are also signs of a pickup in private capex in the current fiscal.”