The Reserve Bank of India (RBI) in its financial stability report released on Wednesday has cast doubt on the government’s ability to contain the fiscal deficit at 6.8 per cent for the current fiscal.
The concerns came after the government pushed for a second supplementary demand for grant of Rs 3.73 lakh crore, which stood at Rs 10.53 lakh crore, despite a massive 83 per cent rise in net tax revenue so far this year.
The government has budgeted Rs 34.83 lakh crore or 6.8 per cent of GDP for total expenditure.
While net tax revenue increased from Rs 5,75,697 crore in October 2020 to Rs 10,53,135 crore by October 2021, an annual growth of 82.93 per cent, total expenditure grew only 9.95 per cent from Rs 16 to Rs 18,26,725 crore. ₹61,454 crore during the same period, RBI said in the Financial Stability Report.
Gross tax collection till October increased by 55.79 per cent to Rs 13,64,101 crore on the total tax revenue front from Rs 8,75,591 crore in October 2020. Overall, direct tax revenue grew 70.73 per cent to Rs. 6,59,066 crore from Rs 3,86,025 crore and indirect tax revenue increased by 45.01 per cent to Rs 6,46,283 crore from Rs 4,45,673 crore.
As of October, all government deficit indicators (gross fiscal deficit, primary deficit and revenue deficit) showed improvement year-on-year as well from their pre-pandemic levels. Gross tax revenues jumped with strong growth across all major items, with direct taxes being the main ones.
Total expenditure grew by 9.9 percent, with a notable feature being a 28.3 percent expansion in capital outlay led by roads and highways, notes the report.
“But with the second supplementary demand for grants of Rs 3.73 lakh crore presented in December, the budgeted fiscal deficit of 6.8 per cent of GDP could come under pressure,” the report warned.
Where fiscal deficit stood at 42.61 of the budgeted target, a decline of Rs 9,53,154 crore in October 2020 to Rs 5,47,026 crore, revenue deficit increased 59.40 per cent to Rs 3,13,478 crore in October 2021 from Rs 7,72,196 crore year-on-year . And the primary deficit was only 76.23 per cent from Rs 6,19,698 crore during the same period to Rs 1,47,289 crore.
While the size of gross government borrowing has grown at a pace that suggests that budget estimates will be met, the report noted a significant increase in the government’s repayment obligations, implying that fiscal consolidation is needed. Despite this, gross borrowings are likely to remain high. ,
Earlier this month, the government sought parliamentary approval for an additional expenditure of Rs 3.73 lakh crore, including an additional expenditure of Rs 62,000 crore, in the company that held the residual assets and liabilities of Air India after its privatization as part of the additional expenditure. And an additional Rs 2,628 crore will be spent. Will be given in the form of loans and advances to Air India for reimbursement of advance from the Contingency Fund.
In the second batch of Supplementary Demands for Grants, the net cash expenditure will be over Rs 2.99 lakh crore and the additional expenditure of Rs 74,517 crore will be met from savings by various ministries.