FY22: Budget spend seen above recent trend

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February 05, 2021 4:50 AM

Union Budget 2021 India: Sharp increases in outlays are seen for FY22, in many areas including grants in aid to states, 'water supply and sanitation”, 'medical and public heath', and transfers to the north-eastern states (see chart).

Except for FY20 (16%) and the incomparable FY21, the growth rates of central Budget in the recent-past years were lower – just an average of 8.6% in the six years to FY19, for instance.

Indian Union Budget 2021-22: While a 26% jump in budgetary capital expenditure envisaged for FY22 is widely lauded, it has been pointed out that given the less than 1% increase in overall expenditure budgeted for the year even with an elevated fiscal deficit of 6.8% of the GDP, the economy may not get the requisite support from public spend in the next financial year. However, the growth in the budget size next year will be higher than in several recent years, if the base is adjusted for the Covid-related one-time expenditures incurred in the current year.

Sharp increases in outlays are seen for FY22, in many areas including grants in aid to states, ‘water supply and sanitation”, ‘medical and public heath’, and transfers to the north-eastern states (see chart).

Additional spending in FY21 – clearances of food and fertiliser subsidies, PMJDY, MGNGREGS , labour schemes etc – will amount to nearly Rs 4 lakh crore; excluding this, the FY21 budget size would have been close to the originally budgeted level (BE) of Rs 30.5 lakh crore, upon which the next year’s budget of Rs 34.8 lakh crore will be higher by 14%.

Except for FY20 (16%) and the incomparable FY21, the growth rates of central Budget in the recent-past years were lower – just an average of 8.6% in the six years to FY19, for instance.

Of course, the addition of the FCI loans of Rs 1.5 lakh crore, which was a below-the-line item, to Budget expenditure won’t have any material impact on the economy, as FCI’s operations have been going on, under the earlier arrangement too.

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