Budget 2021: Government Expenditure Pegged At 15.6% Of GDP In FY22
The portrait of Mahatma Gandhi is displayed on an Indian rupee note. (Photographer: Brent Lewin/Bloomberg)  

Budget 2021: Government Expenditure Pegged At 15.6% Of GDP In FY22

The central government has budgeted higher capital expenditure to aid the economy as it recovers from the pandemic-induced recession. Overall spending as a percentage of GDP will, however, fall in FY22.

Government expenditure for FY22 is pegged at Rs 34.83 lakh crore, according to Budget 2021 documents, marginally higher than the revised estimate of Rs 34.5 lakh crore in FY21. The expenditure in FY21 rose by 13.4% over the budget estimates.

As a percentage of GDP, government expenditure will fall to 15.6% in FY22, after rising to 17.7% of the GDP in the previous fiscal, according to estimates collated from budget documents.
  • Revenue expenditure is pegged at Rs 29.29 lakh crore in FY22 compared with a revised estimate of Rs 30.11 lakh crore in FY21.
  • Expenditure on capital account is budgeted at Rs 5.54 lakh crore in FY22 compared with a revised Rs 4.39 lakh crore in FY21.

Ahead of the budget, JP Morgan’s Sajjid Chinoy and Toshi Jain had argued that it’s possible for the government to deliver a budget that expands spending while simultaneously reducing the headline budget gap.

JP Morgan’s analysis said with GDP expected to rebound sharply in the coming fiscal, some of the tax revenues that were lost in the last two years can be recovered. If that is combined with a successful asset sale programme by the government, then the expenditure can be increased while keeping the deficit under control.

Credit Suisse said that even accounting for a lower fiscal deficit, the budget can expand spending by 20-21% over the current fiscal. Increasing expenditure will also have a positive knock-on effect, it noted. “Higher spending would further boost growth and thus tax receipts as well.”

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