Use fiscal leeway to boost spending – The Economic Times

Clipped from: https://economictimes.indiatimes.com/opinion/et-editorial/use-fiscal-leeway-to-boost-spending/articleshow/83153041.cmsSynopsis

At the same time, the government managed to slip in outstanding dues to the Food Corporation of India and fertiliser producers into the fiscal slippage that the pandemic has given some justification. This will serve to ease the fiscal burden in the current fiscal.

The Centre’s fiscal performance in 2020-21 turns out to have been slightly better than the revised estimates (RE). Data released by the Controller General of Accounts (CGA) shows that the fiscal deficit for 2020-21 stood at 9.3% of the gross domestic product (GDP), lower than 9.5% in the RE due to better-than-expected revenue receipts. At the same time, the government managed to slip in outstanding dues to the Food Corporation of India and fertiliser producers into the fiscal slippage that the pandemic has given some justification. This will serve to ease the fiscal burden in the current fiscal.

Non-debt capital receipts rose due to higher recovery of loans and monetisation of national highways. However, revenue receipts amounted to around 91% of the previous year’s. Lockdown-induced revenue shortfall, interventions to support demand, including through MGNREGA pushed the fiscal deficit way above the target of 3.5% of GDP. A widening fiscal deficit should be no cause for alarm as the risk of excess demand would be almost zero this year. CGA data shows that the pace of spending varied over the months following the announcement of the Aatmanirbhar package, though ideally the momentum of the welfare schemes must be steady. Total expenditure was broadly at the level of RE, but significantly higher (15.4%) than the budget estimate (BE). Revenue expenditure stood 2.5% higher than RE, and capital expenditure was 3.1% less than the RE.

Total subsidies almost trebled during 2020-21 compared to the previous year, including the release of deferred food and fertiliser subsidies, which, reportedly, leaves a cushion of ₹1 lakh crore in 2021-22 within budgeted spending. It should be used to boost spending now, rather than to hasten fiscal adjustment.

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