Fiscal Deficit Stands at 8.2% for April - May Following Increase in Tax Collections

The Fiscal Deficit of India for April and May was recorded at 8.2% of the budget estimates (BE) as against 59 per cent during the same period during last year. The deficit was 30 per cent less than the previous year's level of Rs 4.7 trillion amidst lockdowns across the country to arrest the spread of the pandemic.

The improved numbers are due to a jump in tax and non-tax revenues and the government of India's efforts to keep the expenditure under control during the period.
Economists note that the deficit may rise over a higher outlay on free fertilizer subsidy and food and other outlays recently announced by the Finance Minister - Nirmala Sitharaman as a part of the economic relief package.

The government's total expenditure for April and May periods stood at Rs 4.77 trillion or 13.7 per cent of the budgeted estimates.

According to the government's statistics office, the fiscal deficit in April and May was at Rs 1 trillion, making the amount 8.2 per cent of the budget estimate. Revenue deficit at Rs 65,023 crore or 5.7 per cent of the BE, Net tax revenue at 15.1 per cent, stood at Rs 2.33 lakh crore.

Madan Sabnavis, Cheif economist, CARE Ratings noted that The fiscal deficit has been quite impressive at just 8.2 per cent of the target as against 59 per cent last year. Considering that this year too there was a lockdown the performance has been commendable. More so, as compared with FY20 too, it was lower as the deficit was 52 per cent of the target. This is mostly led by tax revenues which have been better as was borne by Goods and Services Taxes in April. Even the non-tax revenue got in the big-ticket from Reserve Bank of India".

Chief Economist of ICRA, Aditi Nayar says "After a sharp growth in April 2021, capital spending contracted by a considerable 41 per cent in May 2021 suggesting that the widening state-level restrictions necessitated by the second covid surge, had an impact on activity".