On Union government accounts – Growth spending

News: Union government accounts for Q2 of 2021-22 were released.

What does the report say?

It showed that the government has a comparatively better fiscal position due to better revenue collection. Total revenue receipts were over 70% of the budget estimate.

–Higher nominal growth, will also expand the economy and help contain the fiscal deficit as a percentage of GDP.

GDP in real terms, though increased, is still not at par with the pre-pandemic level. Similarly, Private consumption is still lower.

What are the challenges ahead in the way of fiscal consolidation?

-Overall expenditure is less than the last fiscal year. Similarly, the capital expenditure is also less and reached only 45.7% of the budgeted amount. For the economic recovery, the government needs to push the capital expenditure up.

Additional expenditures will push up the fiscal deficit, such as

-Food subsidy bill increased due to the extended distribution of free food grains till March 2022.

-As the rural job guarantee programme funds(MGNREGA) have been exhausted, the government needs to significantly increase its allocation.

-Also, the government has to fund additional fertiliser subsidies and pay arrears for export incentives.

Source: This post is based on the article “Growth spending” published in Business Standard on 2nd December 2021.