indian express editorial

A bit of fiscal room: What the latest data on government finances reveals

On Monday, the Controller General of Accounts released data on government finances for the month of September. Seen in conjunction with data for the previous months, the larger trend that emerges is that Union government tax collections continue to fare better than what was expected. For the first half of the year (April-September), gross tax collections have grown at a robust 18 per cent. In comparison, the Union budget had pegged tax collections to grow just shy of 2 per cent for the full year. The data for the first two quarters of the year only reinforces the view that the tax revenues projected in the budget were conservative, and that actual collections will significantly exceed budgeted expectations. This provides greater fiscal room to both the central as well as the state governments.

The disaggregated data indicates that much of the spurt in taxes has been driven by direct taxes, even as indirect tax growth has held steady. In the first half of the year, direct tax collections have grown at a healthy 24 per cent, with both corporate and income tax collections growing at a fast clip. As per data released by the finance ministry a few weeks ago, net direct tax collections till October 8 had already touched 53 per cent of the budget estimate. On the indirect tax side, while customs and excise collections have been subdued, GST collections have held steady. In fact, on Tuesday, data released by the government showed a sharp sequential uptick with collections touching Rs 1.51 lakh crore in October, driven in part by the festive season. This is the second highest monthly collection since April. However, non-tax collections, including dividends from public sector firms, have been subdued. And while the stake sale in LIC has helped boost government coffers, as total proceeds from disinvestment currently stand at Rs 24,543 crore as against the budgeted target of Rs 65,000 crore, meeting the full year target will be challenging.

On the expenditure side, capital spending continues to drive the Centre’s overall spending. For the first half of the year, central government capex has grown at a staggering pace, especially in key ministries such as railways and road transport and highways. Taking into consideration the spending so far, and the budgeted allocation, Union government capex is likely to grow at a healthy pace for the remainder of the year. If states also fully utilise the interest-free capex loan facility extended by the Centre — disbursals under the scheme remain subdued till now — then overall general government capex could get a significant fillip in the second half of the year. However, higher than budgeted spending on account of food and fertiliser subsidies will exert pressure on government finances, making it challenging to meet the fiscal deficit target for the year.

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Distress of vulnerable | The Indian Express

After contracting in 2020-21, the Indian economy rebounded sharply in 2021-22, ending the year 1.5 per cent above its pre-pandemic level. This year the Reserve Bank of India expects it to grow at 7.2 per cent, making India one of the fastest growing economies in the world during this period. But the recovery from the pandemic lows has been anything but even. Beyond the headline numbers, there are indicators of the unabated pain stemming from the pandemic and the continuing distress in parts of the economy.

One possible indication of the scale of the distress comes from data on households/individuals who have worked under MGNREGA. In 2019-20, the year prior to the pandemic, 7.88 crore individuals worked under the scheme. In 2020-21, the first year of the pandemic, this number rose to 11.19 crore. While in the subsequent year it dipped to 10.62 crore, the number of individuals working under the scheme remained considerably higher than in the pre-pandemic period. In fact, so far this year, 6.29 crore individuals have already worked under the scheme as compared to 6.21 crore in the entire year of 2014-15. This growing reliance on MGNREGA likely indicates that other more remunerative employment opportunities remain limited. Another pointer to the economic distress at the lower end of the income distribution scale comes from the National Crime Records Bureau report — there has been a rise in suicides by daily wage earners and in 2021, daily wage earners accounted for a fourth of suicides in the country. As this paper has also reported, in 2021-22 over 2.3 crore life insurance policies were surrendered way ahead of their maturity by policy holders — this was more than thrice the number of policies surrendered the previous year. Other indicators point to subdued household purchasing power. As per data from SIAM, in 2021-22, sales of two-wheelers were lower than their 2019-20 levels by almost a quarter. Similarly, as per CRISIL, sales of cars priced below Rs 10 lakh grew by a mere 7 per cent in 2021-22, while those priced above Rs 10 lakh (the premium segment) grew by 38 per cent.

The bigger picture that emerges is one of pain at the lower and middle levels of income distribution. As policymakers navigate the tumultuous global macroeconomic environment, they must be mindful of the highly uneven nature of the recovery, and take measures to address the distress of the most vulnerable.

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