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New Delhi: A sharp plunge in tax revenues has seen India’s fiscal deficit rise to more than 83 per cent of the full year targets in just the April-June period.

Data released by the Controller General of Accounts (CGA) showed that contraction in tax revenues as well as rising expenditures pushed the fiscal deficit to over Rs 6.6 lakh crore in the first quarter itself.

In the corresponding period a year ago, the fiscal deficit was at 61 per cent of the budgeted full year number.

Tax revenues were at 8 per cent of the full year target of Rs 16.35 lakh crore, while non-tax revenues were at only 4 per cent of the full year target of Rs 3.85 lakh crore. 

The CGA data showed that the tax collections remain muted as revenues collected from the goods and services tax halved as compared to the period a year ago, and both corporate tax and personal income tax contracted in the quarter.

While corporate tax revenues contracted by 23 per cent in the quarter, personal income tax was down by 36 per cent. 

The Covid-19 pandemic has adversely impacted government revenues with the disinvestment process coming to a stop, and the halt in economic activity impacting corporate tax revenues, and goods and services tax collections. At the same time, its expenditures have increased as India scrambled to be ready to combat the pandemic.

Also read: Fiscal deficit zooms to 4.6% in 2019-20, up from 3.8% estimate. Tax hit, lockdown to blame

Govt’s restrictions on expenditure

The government has announced that it will borrow an additional Rs 4.2 lakh crore from the market taking the total borrowings to Rs 12 lakh crore. 

Total expenditure in the quarter was at Rs 8.16 lakh crore, around 27 per cent of the full year estimate of Rs 30.4 lakh crore. Both capital expenditure and revenue expenditure grew over last year. While revenue expenditure was at 28 per cent of the full year estimates, capital expenditure was at 21.4 per cent of the full year estimates. 

The expenditure utilisation data showed that the highest expenditure was by the ministry of rural development which utilised 72 per cent of its full year budget in the first quarter. 

The nationwide lockdown saw many migrants returning to their villages. The state governments used the Mahatma Gandhi National Rural Employment guarantee scheme to provide work to the returning migrants.

The government also announced an additional allocation of Rs 40,000 crore for the MGNREGA scheme. If one takes into account this additional allocation, then the fund utilisation in the first quarter was 54 per cent.

Other departments, which spent a substantial portion of their full year budgets, include ministry of consumer affairs and food distribution (43 per cent), health and family welfare (32 per cent), labour (30 per cent), agriculture (26 per cent), and ministry of chemicals and fertilizers (36 per cent).

The government had imposed restrictions on expenditure on various government departments both in the first quarter and second quarter of the current financial year.

It effectively limited spending by different government departments to 15-20 per cent of the full year budgets in each of the quarters. The only exceptions were ministries like health and family welfare, consumer affairs, rural development, agriculture, textiles and pharmaceuticals, who were at the forefront of the Covid-19 battle.

The expenditure department of the finance ministry had also asked government departments to not approach with any new project proposals, pointing out that it would approve only those fresh proposals that were part of the government’s over Rs 21 lakh crore economic package for various sectors.

In a note Friday, Aditi Nayar, principal economist at rating agency ICRA said that the tax revenues, non-tax revenues along with the disinvestment proceeds could be short of budgeted targets by Rs 6 lakh crore.

Also read: With fiscal deficit rocketing, Modi govt may have to go back to RBI for support: Economists


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1 Comment Share Your Views


  1. Not that I will reach either milestone, but large sums expressed in billions of dollars are so much more comprehensible than trillions of rupees.


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