In accordance with the official data released by Controller General of Accounts (CGA), the Central Government’s fiscal deficit increased to Rs 9.53 lakh crore (9,53,154 crore), or 119.7% of the annual budget estimate of FY21, at the end of October 2020. It was 114.8% of the annual budget estimate at the end of September 2020. Also, in the first 7 months of the FY20, the deficit was at 102.4% of the annual target.
- The key reason behind this increase is poor revenue realisation due to lockdown imposed to curb COVID-19.
- It should be noted that for FY21 the government had set the fiscal deficit at Rs 7.96 lakh crore or 3.5% of the GDP (Gross Domestic Product) in the budget presented by Finance Minister Nirmala Sitharaman in February 2020.
Important Points from Official Data:
Receipts: The government received Rs 7,08,300 crore which is 31.54% of 2020-21 budget estimate of total receipts up to October 2020. It was 45% of the annual target in the April-October period FY19-20.
- The receipts comprised Rs 5,75,697 crore of tax revenue (net to centre), Rs 1,16,206 crore of non-tax revenue and Rs 16,397 crore of non-debt capital receipts.
Expenditure: It was Rs 16,61,454 crore or 54.61% of 2020-21 budget estimate till October 2020 as against 59% of FY19-20.
Capital Expenditure: It was at 48% of the annual target, as against nearly 60% during April-October 2019.
Devolution of tax share to State Govts: In FY21, Rs 2,97,174 crore was transferred to state governments as part of devolution of share of taxes by the Union government till the end of October 2020. This amount was Rs 69,697 crore lower compared to same period of 2019.
What is Fiscal Deficit?
A fiscal deficit is the gap between government’s expenditure and revenue indicating its total borrowing requirements. It means the government has been spending beyond its means.
- Fiscal Deficit = Total expenditure – (Revenue receipts + Non-debt creating capital receipts)
Recent Related News:
i.On October 6, 2020, the World Trade Organization (WTO) lowered its projection on the volume of world merchandise trade in 2020 to 9.2% as compared to 12.9% fall in April 2020. This is due to the strong trade performances in June-July, 2020 due to easing of lockdowns in many parts of the world.
ii.On October 29, 2020 As per the latest estimates published in the World Bank’s Migration and Development Brief 33, remittance to India will fall by 9% to USD 76 billion due to the ongoing coronavirus pandemic and global economic recession.
About Controller General of Accounts (CGA):
CGA– Soma Roy Burman
Parent Ministry– Ministry of Finance
Headquarter – New Delhi