New Delhi: Tax revenues collected in the first half of 2020-21 declined sharply compared to the year-ago period and were only slightly more than one-fourth of the full year target, data released by the Controller General of Accounts showed.
Tax revenues declined 22 per cent from the year-ago period to Rs 4.58 lakh crore and were at 28 per cent of the full year target of Rs 16.36 lakh crore in the April-September period, the data says, an indication of the uphill task of reviving demand the Narendra Modi government faces, given the revenue constraints.
The expenditure was at 49 per cent of the full year target at Rs 14.8 lakh crore.
The Covid-19 pandemic and the subsequent lockdown adversely impacted economic activity affecting individual incomes and corporate profitability. At the same time, government expenditure rose as India tried to limit the spread of the novel coronavirus.
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Corporate tax revenue, CGST collections drop
After the sharp slump in the initial few months, corporate tax revenues, personal income tax and GST have picked up gradually as manufacturing activity resumed.
However, despite the marginal improvement, corporate tax revenues contracted 40 per cent in the last six months, personal income tax declined by 22 per cent and central goods and services tax (CGST) fell 34 per cent compared to the year-ago period.
On the expenditure side, while revenue expenditure was at 50 per cent of the budgeted targets, capital expenditure was at 40 per cent.
The overall fiscal deficit of the government was at Rs 9.1 lakh crore, 115 per cent of the full year budgeted target, and at 76 per cent of the increased government borrowing of Rs 12 lakh crore.
Aditi Nayar, principal economist at ICRA Ltd, said the data reiterates the strained fiscal situation of the government. She also flagged the contraction in revenue and capital expenditure in the month of September.
“The monthly expenditure trends revealed a discordant sharp contraction in both revenue and capital expenditure in September 2020, suggesting that the expenditure management restrictions are outweighing the fiscal support measures that have been announced so far,” she said in a note Thursday.
Care Ratings, in a note, said that although the economic activities have resumed and are gradually coming back on track, the finances of the central government would continue to be strained.
“The upcoming festive season needs to be closely watched as in case it sees a surge in infection cases and more curbs are imposed by the state governments then finances could be pressured even further,” it said, adding that the fiscal deficit in the current fiscal could be at 9 per cent of GDP as against the budgeted 3.5 per cent.
Also read: India’s fiscal crisis can only get worse as tax revenue is seen dropping 12.5% in 2020-21