The Controller General of Accounts (CGA) has released the monthly data for the month of August 2021 on September 30. Data depicts that the fiscal deficit for the first five months—during April to August for FY22 stood at Rs 4.68 lakh crore against the budget estimate of Rs 15.07 lakh crore. It is 31.1 per cent of the budget estimate. During the same period, in the pandemic year 2021, it was Rs 8.07 lakh crore, 109.3 per cent of the budget target of Rs 7.96 lakh crore; it was Rs 5.54 lakh crore, 78.7 per cent of the budget estimate of Rs 7.04 lakh crore in the pre-pandemic year 2019.
The fiscal position continued to look healthy due to buoyancy in tax revenue. As per the data of the CGA, the gross tax revenue during April to August in FY22 was Rs 8.60 lakh crore against Rs 5.04 lakh crore in FY21. It has grown by 70.48 per cent during the first five months of FY22 over the corresponding period of FY2021. However, during the same period in the previous year it contracted -23.70 per cent.
Non-tax revenue during April to August in FY22 was Rs 1.49 lakh crore against Rs 0.86 lakh crore in FY21. It has shown a growth of 73.26 per cent in FY22 as compared to a negative growth of -56.63 per cent in the corresponding period of FY21. The major amount of Rs 1.02 lakh crore received as dividend and profit comprising Rs 99,122 crore from the RBI and Rs 3,133 crore from Central Public Sector Enterprises (CPSEs). It is 98 per cent of the budget target.
Moreover, non-debt capital income has clocked a growth of 127.85 per cent in FY22 against -63.51 per cent in the corresponding period of FY21. Data reveals that financial health of the government in FY22 is improving against the pandemic year 2021 and pre-pandemic year 2019.
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In FY21, the gap between government’s total income and expenditure had increased to Rs 18.49 lakh crore or 9.5 per cent of the GDP. It was because economic disruptions were set for a long period due to COVID-19 global pandemic. For FY22, the government has set a target of fiscal deficit at 6.8 per cent of the GDP to continue on the path of fiscal consolidation. The government intends to reach a fiscal deficit level below 4.5 per cent of the GDP by 2025-26.
Now the question arises whether the budget target of fiscal deficit would be achievable or the actual figure will deviate from the budgeted figure. Experts have different opinions in this regard. While economist Madan Sabnavis expects that fiscal deficit would be 1 per cent point wider than the budget estimate, ICRA estimates that it would be narrower than the budget target.
The government is expected to achieve fiscal consolidation through buoyancy of tax revenue and increased receipts from monetisation of assets including CPSUs and land. At the direct tax front, the government has already collected Rs 6.45 lakh crore, 42 per cent of the budget estimate of Rs 15.45 lakh crore. The growth in corporate tax is 159.68 per cent and 69.35 per cent in income tax in FY22 against the same period in FY21. On the indirect tax front, Gross GST is touching Rs 1 lakh crore target since October 2020 except June 2021. Union excise tax is growing by 36.69 per cent and custom is growing by 135.98 per cent.
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If we talk about the disinvestment of CPSUs and monetisation of assets, the government set a target to collect Rs 2.68 lakh crore—Rs 1.80 lakh crore from disinvestment and Rs 0.88 lakh crore from monetisation of assets in FY22. The government has announced a national monetisation pipeline (NMP) to finance its ambitious infrastructure pipeline. It is expected that the government will collect Rs 5.96 lakh crore over four years ending 2024-25 by leasing several assets to the private players.
However, with reference to disinvestment, the reality is different. As per the Department of Investment and Public Asset Management (DIPAM), the government so far has collected only Rs 9,111 crore via disinvestment. It is only 5.21 per cent of the budget target of Rs 1.75 lakh crore. It shows poor performance by DIPAM as in FY21, the government had achieved 28.74 per cent of the target during the same time. However, the government is confident of achieving the target. DIPAM secretary T.K. Pandey is of the opinion that the disinvestment programme is back on track after being hit by a second wave of global pandemic. The government intends to complete the privatisation of Air India, BPCL, BEML, Shipping Corporation of India, Pawan Hans and Neelachal Ispat Nigam Limited, IDBI Bank, along with two public sector banks and one general insurance company in the current fiscal.
Thus, what would be the amount of the fiscal deficit? It will depend upon the performance of the DIPAM. Because the government’s capital expenditure has been increasing since the last two months, achieving the disinvestment target will be crucial. If the tax buoyancy follows the same path and the target of disinvestment is achieved, the fiscal deficit would be around the budget estimate of Rs 15.07 lakh crore, otherwise it may be more than anticipated.
Vinay K. Srivastava is the author of ‘Privatisation of Public Enterprises in India’ and teaches at I.T.S Ghaziabad, India. The views expressed in this article are those of the author and do not represent the stand of this publication.
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