India's fiscal deficit for April-Feb hits 76% of revised estimates

The Centre’s fiscal deficit touched Rs 14.1 trillion in the first 11 months of FY21 — 76 per cent of the 2020-21 revised estimates of Rs 18.5 trillion and 36 per cent higher than last year’s corresponding level of Rs 10.4 trillion.

The government expects to earn revenues of Rs 1.85 trillion in March 2021, 40 per cent lower than what it earned in the year-ago period.

It intends to spend a massive Rs 5.9 trillion as revenue expenditure, and close to Rs 33,000 crore as capital expenditure this month against Rs 1.9 trillion of revenue spending and Rs 30,000 crore of capex in March 2020.

Experts say the Centre has likely underestimated its revenue receipts for March.

On the other hand, it has likely overestimated its revenue spending for March (imputed from the RE for FY21 and April-February data), and may spend a bit less than the projection of Rs 30.1 trillion. 

“We anticipate the fiscal deficit to trail the RE by Rs 1.3-1.5 trillion, based on our expectation of a modest upside to the tax revenues, and undershooting of its non-interest non-subsidy revenue expenditure,” Aditi Nayar, principal economist at ICRA said in a note. 

“We forecast the fiscal deficit in FY21 at Rs 17-17.2 trillion.” 

The Centre expanded the fiscal deficit to 9.5 per cent of GDP for FY21, showing its commitment towards a government spending-led recovery from the Covid shock. 

From April to February, revenue spending has grown 12 per cent, but still leaves pending revenue expenditure of Rs 5.9 trillion for the current month. Of this, close to Rs 2.3 trillion will be in the form of subsidies, mostly towards the clearing of a part of arrears of the Food Corporation of India (Rs 2.1 trillion). Another Rs 1.3 trillion would go towards interest payment. 

To stick to the Budget numbers, the remainder of Rs 2.3 trillion will need to be done in March — 20 per cent higher than Rs 1.9 trillion spent in March 2020. 

Most of this is towards scheme-related spending, most notably the Railways.

The pace of capex in general, on the other hand, seems to be promising. Capex is nearly 33 per cent more than April-February of FY20, and has closed in on 92 per cent of the annual plan till February 2021. 

In March 2020, the Centre’s revenue receipts rose by Rs 3.1 trillion, against the imputed shortfall of Rs 1.85 trillion for March 2021. Revenue receipts have nearly remained the same as last year (0.5 per cent contraction). The Centre is most likely to exceed its estimate on this front, resulting in a smaller fiscal deficit.

Ad-hoc settlement of IGST, to the tune of Rs 28,000 crore in March, will also help the Centre and states in terms of cash flow.