Sharp fiscal consolidation

by Manasi Swamy

The Central Government consolidated its fiscal position in the first half of 2021-22 by limiting the gross fiscal deficit at Rs.5.3 trillion, or 35 per cent of its annual budget estimate. In absolute terms, the deficit was the lowest in the last four years. It was 42.4 per cent lower than in the first half of 2020-21 and also 19.1 per cent and 11.4 per cent lower compared to the first half of 2018-19 and 2019-20, respectively. The fiscal consolidation became possible primarily on account of buoyancy in tax collections. But it also came at a cost of lower transfers to the states of their share in central taxes and slow pace of expenditure by the Centre itself.

Gross tax collections by the Central Government increased year-on-year by 64.2 per cent to Rs.11.8 trillion during April-September 2021 in spite of the second wave of Covid-19 hitting India. This was also the highest tax mobilisation by the Centre in the first half of any fiscal. The buoyancy was observed across all major tax heads. Income tax collections grew year-on-year by 64.7 per cent, while corporate tax collections more-than-doubled from their level during April-September 2021. Among indirect taxes, GST collection grew by 42.4 per cent, excise duty collection grew by 33.3 per cent and customs duty collection increased by a whopping 129.6 per cent. Despite this steep increase in the Centre’s tax collection, the share of states in central taxes stagnated at its year-ago level of Rs.2.6 trillion during April-September 2021.

Receipts of non-tax revenue, at Rs.1.6 trillion, during April-September 2021, were also 73.8 per cent higher than the year-ago level. Non-debt capital receipts rose year-on-year by 23.8 per cent to Rs.181.2 billion without much progress on the disinvestment front. The government managed to garner only Rs.91.2 billion through disinvestment of its stake in PSUs in the first half of 2021-22. This accounted for a miniscule 5.2 per cent of the ambitious disinvestment target of Rs.1.75 trillion set for the fiscal year 2021-22.

The government thus managed to achieve 55.6 per cent of its non-debt receipts target for 2021-22 during the first half of the fiscal. It also mobilized Rs.4.8 trillion through market borrowings on a net basis, which accounted for 52 per cent of its annual target.

Despite having garnered enough receipts, the government went slow on expenditure during the first half of 2021-22. It spent Rs.16.3 trillion, which was only 46.7 per cent of the expenditure it had budgeted for the entire fiscal year. A bulk of the expenditure was revenue expenditure, which grew year-on-year by 6.3 per cent to nearly Rs.14 trillion. This is 47.7 per cent of the revenue expenditure it has budgeted for the fiscal year 2021-22.

Interest payments increased by 19 per cent to Rs.3.6 trillion during April-September 2021 compared to the year-ago level. Expenditure on major subsidies, which includes food, fertiliser and oil subsidy, increased by 15.8 per cent to Rs.1.8 trillion. Important ministries reported a steep fall in expenditure from last year. During April-September 2021, revenue expenditure by the Ministry of Agriculture declined by 17.5 per cent to Rs.587 billion, by the Ministry of Health & Family Welfare declined by 4.5 per cent to Rs.367 billion and that by the Ministry of Rural Development, which runs the Centre’s flagship rural employment guarantee scheme MGNREGS, fell by 34.4 per cent to Rs.821 billion. Expenditure on pension, both civil and defence, fell year-on-year by 12.3 per cent to Rs.886 billion, but that on police increased by 8.4 per cent to Rs.513 billion.

Revenue expenditure transfers to the states and UTs with legislature increased year-on-year 33.1 per cent to Rs.1.2 trillion, while transfers to the UTs without legislation increased by 13.5 per cent to Rs.213 billion during April-September 2021. But, these accounted for only 42 per cent of the transfers budgeted for states and UTs for fiscal year 2021-22.

The government stepped up its capital expenditure by 38.3 per cent to Rs.2.3 trillion during April-September 2021. But, on a pro-rata basis this too appears low. The government has budgeted for capital expenditure of Rs.5.5 trillion for fiscal year 2021-22. It spent only 41.4 per cent of it during the first half. A bulk of the capital expenditure during April-September 2021 was done by the Ministry of Road Transport & Highways. The ministry spent 68.2 per cent of its annual budget, which amounted to Rs.738 billion, 81.5 per cent higher than during the first half of 2020-21. The Ministry of Railways increased its capital expenditure during April-September 2021 by 62.3 per cent to Rs.463 billion. But, this was only 43.2 per cent of the annual budgeted amount. Capital expenditure on defence during April-September 2021, at Rs.636 billion, was 45.4 per cent of its annual budgeted amount.

In a review meeting held on November 1, 2021, Finance Minister Nirmala Sitharaman asked the ministries of power and coal to ensure that project implementation is fast-tracked. As per the data released by the Controller General of Accounts (CGA), the Ministry of Power had incurred capital expenditure of Rs.517 billion till September 2021, while capital expenditure by the Ministry of Coal was zilch.

At end-September 2021, the Centre had withdrawn the quarterly cap on expenditure, of 20 per cent of budget estimates, it had imposed earlier. This has paved the way for many central ministries to step up their spending.

Unemployment Rate (30-DAY MVG. AVG.)
Per cent
7.0 +0.7
Consumer Sentiments Index
Base September-December 2015
59.8 -0.3
Consumer Expectations Index
Base September-December 2015
61.8 -0.5
Current Economic Conditions Index
Base September-December 2015
56.6 0.0
Quarterly CapEx Aggregates
(Rs.trillion) Dec 20 Mar 21 Jun 21 Sep 21
New projects 1.50 2.25 2.64 2.09
Completed projects 0.87 1.17 0.72 1.09
Stalled projects 0.30 0.26 0.32 0.03
Revived projects 0.15 0.22 0.12 0.27
Implementation stalled projects 0.20 0.34 0.25 0.22
Updated on: 01 Dec 2021 8:28PM
Quarterly Financials of Listed Companies
(% change) Dec 20 Mar 21 Jun 21 Sep 21
All listed Companies
 Income 1.6 15.1 39.3 27.8
 Expenses 0.1 7.4 38.9 27.2
 Net profit 58.1 330.5 134.8 53.0
 PAT margin (%) 8.4 8.8 9.0 9.7
 Count of Cos. 4,460 4,384 4,471 4,487
Non-financial Companies
 Income 0.2 17.7 56.3 35.8
 Expenses -0.7 10.6 57.4 36.3
 Net profit 51.8 221.2 199.9 59.5
 PAT margin (%) 8.8 9.0 8.5 8.8
 Net fixed assets 2.2 13.9
 Current assets 4.4 17.5
 Current liabilities 0.8 6.8
 Borrowings -4.3 21.5
 Reserves & surplus 11.7 18.8
 Count of Cos. 3,282 3,244 3,296 3,281
Numbers are net of P&E
Updated on: 01 Dec 2021 8:28PM
Annual Financials of All Companies
(% change) FY19 FY20 FY21
All Companies
 Income 13.3 0.4 -1.3
 Expenses 13.6 0.4 -3.8
 Net profit 15.2 -10.7 50.4
 PAT margin (%) 2.1 2.1 6.5
 Assets 9.8 8.7 11.4
 Net worth 8.5 4.6 13.2
 RONW (%) 3.7 3.5 8.6
 Count of Cos. 32,313 31,235 8,302
Non-financial Companies
 Income 14.0 -1.4 -3.1
 Expenses 14.2 -1.1 -5.2
 Net profit 21.7 -20.8 40.5
 PAT margin (%) 2.9 2.4 6.0
 Net fixed assets 5.7 10.7 2.0
 Net worth 7.9 2.4 11.0
 RONW (%) 6.4 5.0 9.6
 Debt / Equity (times) 1.0 1.1 0.7
 Interest cover (times) 2.3 1.9 3.2
 Net working capital cycle (days) 74 81 78
 Count of Cos. 25,815 24,885 6,091
Numbers are net of P&E
Updated on: 28 Nov 2021 2:41PM