Government's revenues muted despite green shoots

by Manasi Swamy

Central Government’s non-debt receipts dipped y-o-y by 12.8 per cent to Rs.1.9 trillion in September 2020, in spite of the economy showing green shoots of recovery. Nonetheless, the fall was the lowest recorded in the current fiscal thus far.

Net tax collections did report a seasonal pick-up in September 2020. These amounted to Rs.1.7 trillion, as compared to Rs.2.8 trillion cumulatively mobilised during the first five months of fiscal year 2020-21. But, when compared year-on-year, these were lower by 14.2 per cent.

The tax collection growth slipping into a negative territory once again, after turning positive in August is disheartening. From over 70 per cent y-o-y contraction in April-May 2020 and a little below 25 per cent contraction in June-July 2020, net tax collections had reported a smart 24 per cent growth in August 2020. This growth was exceptional as it had benefitted from a low base of last year. The Centre sure could not have sustained such high rate of tax growth in September. But, the fall registered in September appears a bit steep considering that many segments of the economy are showing signs of pick-up.

The fall in gross tax collections in September was even steeper at 16.2 per cent. The Centre managed to reduce its intensity at the net level by cutting cash outgo to states on account of their share in central taxes by 24.5 per cent compared to a year-ago.

Among direct taxes, gross collections of income tax grew by 2.7 per cent to Rs.487.5 billion. This is the first month since February 2020 when income tax collections grew year-on-year. This is a positive sign for the recovery of the economy as although personal income tax assessees account for less than five per cent of India’s population, contribution of their income to GDP is nearly 20 per cent. They can spreahead growth through their consumption expenditure.

Gross collections of corporation tax continued to be in the red. The 32.1 per cent y-o-y contraction in these to Rs.857.5 billion suggests that the whopping 800 per cent growth in profits before tax seen in the early results of 470 listed companies for the September 2020 quarter may not be representative of the performance of the entire industry. While large companies have done well, their smaller counterparts seem to be still struggling to recover.

Within indirect taxes, gross collections of customs duties declined y-o-y by 18 per cent to Rs.80.5 billion in September 2020 as the country’s import bill shrank by 19.6 per cent during the month. Goods and services tax collections (GST) in September amounted to Rs.439.3 billion. These were 4.3 per cent higher than the year-ago level. After slumping to Rs.167 billion in April, GST collections improved as the economy started opening up. GST collections averaged Rs.437 billion in the last four months. This is higher than last year’s average monthly collections of Rs.501 billion.

Excise duty collections continued to report a double-digit growth for the fourth consecutive month. In September 2020, these amounted to Rs.283.6 billion, 42.5 per cent higher than in the corresponding month a year ago. The robust growth in excise collections can be attributed to the steep hike in tax rates by the Centre. It had hiked excise duty on petrol and diesel aggressively from Rs.22.98 per litre and Rs.18.83 per litre, respectively, on March 14, 2020 to Rs.32.98 per litre and Rs.31.83 per litre by May 6, 2020.

Non-tax revenues of the Centre also declined y-o-y by a steep 41.2 per cent to Rs.61.3 billion. This was mainly on account of a 92.4 per cent contraction in dividend receipts from public sector undertakings (PSUs). In August 2020 too, the Centre’s non-tax revenues had slumped y-o-y by 60.2 per cent due to lower transfer of surplus by the Reserve Bank of India (RBI) compared to a year-ago.

Non-debt capital receipts surged to Rs.57.5 billion in September 2020, marking a whopping 240.9 per cent growth over the year-ago receipts. After a long lull, the government kickstarted its disinvestment programme at the fag end of August. It offloaded its 14.8 per cent stake in Hindustan Aeronautics Ltd (HAL) for Rs.49.2 billion. In September 2020, it diluted its 12.8 per cent stake in Bharat Dynamics for Rs.7.7 billion. The selling spree continued in October, with the government garnering Rs.4.4 billion from the IPO of Mazagon Dock Shipbuilders Ltd.

The Centre has set an ambitious disinvestment target of Rs.2.1 trillion for 2020-21. But, it managed to achieve only three per cent of it in the first half of the fiscal. Its revenue receipts, at Rs.5.5 trillion during April-September 2020, were also only 27.3 per cent of its annual target. Usually, by September, the Centre achieves more-than 40 per cent of its annual revenue target. The Centre has implicitly admitted that it cannot meet its non-debt receipts target for 2020-21 by expanding its annual borrowings programme by Rs.4.2 trillion to Rs.12 trillion. At the same time, it has started altering its strategies and devising new ways for revenue generation in order to avoid any further fiscal slippage.

As per media reports, the Centre is looking to raise excise duty on petrol and diesel by up to Rs.5 per litre to generate additional revenues. It has also altered its stance on Air India’s disinvestment by allowing bidders to decide the level of debt they wish to take on along with the loss-laden airline. While time for LIC’s IPO is slipping away, the Centre is still optimistic on raising around Rs.400 billion from strategic sale of BPCL. It has extended the deadline for expression of interest in BPCL for the fourth time in a row to November 16, 2020. Besides, it is planning to exit BEML, Container Corporation, Shipping Corporation of India, Pawan Hans and Central Electronics. The Centre has also asked eight PSUs including Coal India, NTPC, NMDC and Engineers India to buyback their shares in order to avoid any further revenue slippage.

Unemployment Rate (30-DAY MVG. AVG.)
Per cent
6.6 0.0
Consumer Sentiments Index
Base September-December 2015
51.8 -0.3
Consumer Expectations Index
Base September-December 2015
53.6 -0.6
Current Economic Conditions Index
Base September-December 2015
48.9 0.0
Quarterly CapEx Aggregates
(Rs.trillion) Dec 19 Mar 20 Jun 20 Sep 20
New projects 5.55 3.97 0.78 0.76
Completed projects 1.66 1.78 0.25 0.69
Stalled projects 0.61 0.73 0.11 0.08
Revived projects 0.83 0.42 0.68 0.34
Implementation stalled projects 0.13 10.02 0.09 0.03
Updated on: 01 Dec 2020 9:28AM
Quarterly Financials of Listed Companies
(% change) Dec 19 Mar 20 Jun 20 Sep 20
All listed Companies
 Income -1.7 -5.0 -27.6 -6.2
 Expenses -2.2 -1.9 -27.9 -10.1
 Net profit -10.9 -48.2 -40.2 45.3
 PAT margin (%) 5.1 2.4 5.3 8.3
 Count of Cos. 4,459 4,315 4,300 4,198
Non-financial Companies
 Income -5.5 -9.0 -37.4 -10.3
 Expenses -6.4 -5.0 -37.6 -14.0
 Net profit -13.9 -49.4 -55.7 30.0
 PAT margin (%) 5.7 3.3 4.5 8.1
 Net fixed assets 13.3 6.0
 Current assets 3.0 0.7
 Current liabilities 5.7 -2.9
 Borrowings 15.7 8.1
 Reserves & surplus 1.5 4.5
 Count of Cos. 3,312 3,229 3,221 3,160
Numbers are net of P&E
Updated on: 01 Dec 2020 9:28AM
Annual Financials of All Companies
(% change) FY18 FY19 FY20
All Companies
 Income 8.4 13.4 0.3
 Expenses 9.9 13.7 0.9
 Net profit -40.5 21.9 -18.3
 PAT margin (%) 2.0 2.3 4.2
 Assets 10.9 9.5 9.3
 Net worth 7.5 8.6 4.8
 RONW (%) 3.5 4.2 6.0
 Count of Cos. 28,425 27,638 6,888
Non-financial Companies
 Income 8.7 13.9 -2.8
 Expenses 8.8 14.1 -1.7
 Net profit -9.1 23.0 -27.7
 PAT margin (%) 2.7 3.1 4.4
 Net fixed assets 7.2 5.5 13.2
 Net worth 6.1 8.4 1.7
 RONW (%) 5.6 6.8 7.5
 Debt / Equity (times) 1.0 1.0 0.8
 Interest cover (times) 2.1 2.4 2.8
 Net working capital cycle (days) 77 70 57
 Count of Cos. 23,077 22,402 5,084
Numbers are net of P&E
Updated on: 28 Nov 2020 11:22AM