The central government exhausted just 8.2% of its full-year fiscal deficit target in the first two months (April-May) of FY22 compared to 59% during the same period a year ago, as both revenue and capital expenditure fell from the same period a year ago while revenue receipts improved significantly.
The state-wide lockdowns imposed across the country due to the second wave of the coronavirus pandemic is believed to have delayed project implementation along with economic activities.
According to data released by the Controller General of Accounts, 13.7% of total expenditure was exhausted by May compared to 16.8% during the corresponding period last year when a nationwide lockdown was in place induced by the first wave of the pandemic. Capital (11.4%) and revenue (13.4%) expenditure both came lower than their levels a year ago.
Care Ratings chief economist Madan Sabnavis said the fiscal performance has been quite impressive because tax revenues have been better as was borne by GST in April while non-tax revenue got the big boost from RBI.
“Expenditure was under control for the usual subsidy payments for previous year happening in April-may did not take place this time as the amounts were subsumed in the Budget. Therefore outflow from department of food was lower. Also compared with last year NREGA was lower as seen in outlay of the ministry for rural development. Fertilizer subsidy was also lower. Therefore on the whole the budget has been well managed. The concerns going forward will be higher outlay on free food and fertilizer subsidy as well as other outlays under the finance minister’s relief programme,” he added.
Government released 23% of its full-year food subsidy by May while no petroleum subsidy was released during the first two months of the fiscal year.
While the government has set a target of reducing the fiscal deficit to 6.8% of GDP in FY22 from 9.2% of GDP a year ago, subsequent announcements including free food grains till November and greater outlay for fertilizer subsidy may increase the full-year fiscal deficit.
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