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Fiscal Deficit November Update –reaches 35% higher than the budget estimate
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India's fiscal deficit stood at Rs 10.75 lakh crore at the end of November, or 135.1 per cent of the 2020-21 Budget Estimates (BE), at the end of November 2020, mainly on account of low realisation of revenue due to disruption in business activities amid the coronavirus pandemic. The fiscal defict, or gap between the expenditure and revenue, had breached the annual target in July this year.


Key takeaways from the fiscal data

1. The government's total expenditure up to November rose 4.7 per cent to Rs 19.06 lakh crore. However, even after the pickup in spending in November, it was 62.7 per cent of the budget compared with 65.3% in FY20. Capital expenditure stood at 58.5 per cent of the estimate against 63.3 per cent in FY20.

2. Revenue expenditure on fertilizers, defence, education and petroleum have been lower in the current financial year from that in the previous year. The expenditure pattern suggests that expansion in fiscal deficit is not due to increased expenditure which has been muted so far. The higher fiscal deficit is primarily originating from lower receipts.

3. The government's total receipts stood at Rs 8.31 lakh crore (37 per cent of BE 2020-21) till the end of November 2020. This included Rs 6.88 lakh crore tax revenue (net to centre), Rs 1.24 lakh crore of non-tax revenue and Rs 18,141 crore of non-debt capital receipts. Non-debt capital receipts consist of recovery of loans and disinvestment proceeds. During the corresponding period last fiscal, the total receipts were 48.6 per cent of 2019-20 BE.

4. The government’s gross tax revenue was at Rs 10.26 lakh crore, contracting 12.6 per cent in April-November 2020. Of this, Rs 2.68 lakh crore was collected as income tax, down 12.28 per cent from the corresponding period of the previous year. Corporation tax collected stood at Rs 2.89 lakh crore, contracting 35.66 per cent annually.

5. The tax revenue collection was 42.1 per cent of BE of 2020-21, compared with 45.5 per cent of BE (2019-20) during the corresponding period a year ago. Non-tax revenue was 32.3 per cent of BE. During the corresponding period of the last fiscal, it was 74.3 per cent of BE 2019-20.

6. The goods and services tax collected by the central government was Rs 3.28 lakh crore during the period, a contraction of 25.33%.

7. The continuing 17 per cent decline in revenue receipts, coupled with subdued disinvestment receipts, has engendered the massive fiscal deficit in FY20 so far.

The month of November saw a sharp and encouraging ramping up of the Government of India's spending, with the monthly outgo recording a year-on-year expansion of 32 per cent for revenue expenditure and nearly 250 per cent on a small base for capital expenditure. A sustenance of this trend will bolster economic activity and help the Indian economy exit the recession in the coming quarter.

 

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