As against the revised nominal GDP figure of Rs 197.45 lakh crore released by the National Statistics Office for FY21 on Monday, the fiscal deficit of Rs 18.21 lakh crore incurred by the Centre in the year is slightly lower at 9.2%.
With its net tax revenue being 6% higher than the revised estimate (RE) presented in February, the Centre managed to narrow its fiscal deficit moderately to 9.2% of the GDP in FY21, against 9.5% budgeted (RE). This was still the highest level of deficit for the Centre since 7.8% reported in FY91, the year when economic liberalisation was unleashed amid a balance of payment crisis.
Apart from a huge revenue shortfall, stimulus measures to boost economic activities, clearance of arrears to Food Corporation of India (FCI) and fertilizer companies contributed to the surge in the fiscal deficit. Substantial off-budget expenditures (read payments to FCI) were brought into the Budget as well.
While a fiscal deficit of 6.8% is estimated by the Centre for FY22, some analysts expect it to go up to 7.8% or thereabouts. Successive years of higher deficits by the Centre and states have worsened India’s debt to GDP ratio; the ratio, which is close to 89% in FY21 is seen to be above 90% in FY2, as against an upper threshold of 60% suggested by an expert panel as being comfortable.
Although the data released by the Controller General of Accounts on Monday put the Centre’s fiscal deficit for FY21 at 9.3% of GDP, as against the revised nominal GDP figure of Rs 197.45 lakh crore released by the National Statistics Office for FY21 on Monday, fiscal deficit of Rs 18.21 lakh crore incurred by the Centre in the year is slightly lower at 9.2%.
The Centre’s non-debt capital receipts in the last financial year were 23.9% higher than RE. The revenue expenditure was 2.5% higher than RE while capital expenditure was 3.1% less than RE. However, capex in FY21 was 26.5% higher than the amount spent in FY20. Total expenditure in FY21 stood at Rs 35.1 lakh crore, which was 1.8% higher than RE.
“Although the government announced a stimulus package of more than 10% of GDP in FY21 (including credit enhancement steps), actual stimulus in FY12 budget has been Rs 4.69 lakh crore or 2.4% of GDP,” said India Ratings chief economist D K Pant.
Finance minister Nirmala Sitharaman said in the last Budget speech: “We plan to continue with our path of fiscal consolidation, and intend to reach a fiscal deficit level below 4.5% of GDP by 2025-2026 with a fairly steady decline over the period. We hope to achieve the consolidation by first, increasing the buoyancy of tax revenue through improved compliance, and secondly, by increased receipts from monetisation of assets, including Public Sector Enterprises and land.”