RBI has expressed this apprehension in view of the second supplementary demand for grants of Rs 3.73 lakh crore, despite net tax revenue growing by 83 per cent to Rs 10.53 lakh crore so far.
The government has earmarked a total expenditure of Rs 34.83 lakh crore in the budget for 2021-22. It is 6.8 percent of GDP (Gross Domestic Product).
In the Financial Stability Report released on Wednesday, the Reserve Bank said that the net tax revenue of the government increased from Rs 5,75,697 crore in October, 2020 to Rs 10,53,135 crore in October 2021. This is an increase of 82.93 per cent on a year-on-year basis. While the total expenditure has increased only by 9.95 percent during this period. The total expenditure led by infrastructure stood at Rs 18,26,725 crore till October 2021 as against Rs 16,61,454 crore in the corresponding period last year.
As per the report, the total tax revenue till October this year grew by 55.79 per cent to Rs 13,64,101 crore from Rs 8,75,591 crore in October, 2020.
All government deficits (gross fiscal deficit, primary deficit and revenue deficit) as of October show signs of improvement from pre-pandemic levels as well as on an annualized basis. Gross tax revenue is better with strong growth.
“But the target of keeping the fiscal deficit at 6.8 per cent of GDP could be put under pressure in view of the second supplementary demand for grants of Rs 3.73 lakh crore presented in December,” cautioned the report.
The fiscal deficit in October, 2021 stood at Rs 5,47,026 crore, which is 42.61 per cent of the target. It was Rs 9,53,154 crore in October last year. At the same time, the revenue deficit stood at Rs 3,13,478 crore, which is 59.40 percent of the target. Whereas last year it was Rs 7,72,196 crore.
According to the report, although the size of gross government borrowing has grown at a pace that suggests that budget estimates will be met, there are signs of a significant further increase in the government’s liability obligations. This means that gross borrowings may remain high despite fiscal consolidation.
It is noteworthy that the government presented the second supplementary demand for grants in Parliament this month to approve additional expenditure of Rs 3.73 lakh crore.