The data on the receipts of the union government, available up to October of the 2021-22 financial year, suggests that it might earn more than it had budgeted for in this year’s budget. This would be unlike the 2020-21 financial year, when the government’s revenues took a big hit because of the Covid-19 pandemic and fell short of its budget estimates. Does this mean the government is also likely to spend more than it had budgeted for in this financial year? Here are two charts that explain this.
The 68-day lockdown imposed in India in the 2020-21 financial year forced people to stay indoors. Therefore, the government had to step in to ensure that people’s loss of livelihood didn’t push them into destitution or hunger and the economy does not collapse. While the government’s success or the lack of it on this front is a larger question, the central government did spend more money in the last financial year than it budgeted despite its receipts decreasing. It had planned to spend ₹30.42 lakh crore in 2020-21, 13.2% more than in 2019-20, when it presented its budget in February. Revised estimates of expenditure published in February show that its spending in the last financial year was likely to be ₹34.5 lakh crore, 28.4% more than in 2019-20. Even this number is likely to be an underestimate, as provisional figures of actual spending by the Controller General of Accounts (CGA) published in October show that the spending in the last financial year was ₹35.11 lakh crore or 30.7% more than in 2019-20.
How did the government spend more in the last financial year when its receipts declined? By borrowing more than usual. Borrowings were 34.8% of the Union government’s total receipts in 2019-20. It planned to reduce this to 26.2% in 2020-21, but revised it to 53.6% by the end of the year. Perhaps to reduce this level of borrowing – the 2021-22 budget says borrowings will be 43% of total receipts — the government has not planned to increase spending a great deal this year. Its budget for this year planned for the spending of ₹34.83 lakh crore, just 1% more than the revised estimates for 2020-21. If it spends just this budgeted amount, this year’s spending might turn out to be 0.8% less than in 2020-21, as the provisional actuals published by CGA show that the spending last year was more than shown in the revised estimates.
The trends in government spending this year suggest that while revenue collections are doing better this year compared to the budgeted amount, spending is largely on track to follow the budget. With seven of twelve months or 58% of the year past, the central government has spent 52.4% of the budgeted amount. Revenue spending or the spending done for the day-to-day operations such as paying salaries or disbursing subsidies is at 53.7% of the budgeted amount. Capital spending or the spending done for acquiring assets or for investment is at 45.7%. While these numbers seem to lag behind the budgeted amount – if 58% of the budgeted amount was spent, the spending could be said to be on time – it is not unusual for more money to be spent towards the end of the financial year. Provisional actuals for 2020-21, for example, show that by October the government had spent only 47% of the amount it ended up spending by the end of that year.
How is the spending of different government departments so far? Of the 14 ministries that were each allocated more than a per cent of the budget and account for 93% of the total budget, the spending of six is on time or more than 58% of their respective allocations. These are the ministries of defence, consumer affairs, rural development, road transport, chemicals and fertilizers, and housing and urban affairs. The spending of the other eight ministries is around 40%, except the jal shakti ministry, which has spent just 27% of the budgeted amount so far.
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