Tax revenue of the central government fell sharply in the April-June quarter, underscoring the effects of Covid-19-related lockdown on the economy, causing a spike in government borrowing to a record, data released on Friday showed.
Gross tax revenue declined 32.6 per cent year-on-year in the first quarter of the year with the centre’s goods and services tax (GST) taking the maximum 47 per cent knock.
Government of India received Rs1,53,581 crore (6.84 per cent of corresponding Budget Estimates for 2020-21 of total receipts) up to June 2020 comprising Rs1,34,822 crore tax revenue (net to centre), Rs15,186 crore of non-tax revenue and Rs3,573 crore of non-debt capital receipts. Non-debt capital receipts consists of recovery of loans (Rs3,573 crore).
An amount of Rs1,34,043 crore has been transferred to state governments as devolution of share of taxes by Government of India up to this period, which is Rs14,588 crore lower than the previous year.
Total expenditure incurred by Government of India stood at Rs8,15,944 crore (26.82 per cent of corresponding Budget Estimates for 2020-21), out of which Rs7,27,671 crore is on revenue account and Rs88,273 crore on capital account. Out of the total revenue expenditure, Rs1,60,493 crore is on account of interest payments and Rs78,964 crore on account of major subsidies.
The government has decided to raise its borrowing to Rs12 lakh crore for 2020-21 in order to cope with the financial difficulties caused by Covid-19. Any increase in the public debt will worsen the ratio of India’s debt-to-GDP which, according to the IMF, is already higher than the average of emerging market economies.
The extra borrowing is to meet the revenue shortfall pushed up the fiscal deficit at the end of June to Rs6.62 lakh crore, 83.2 per cent of the full year budget estimate or Rs7.96 lakh crore.
This is highest fiscal deficit in percentage terms for the first quarter going back to available data since FY1999-2000.
The contraction in gross tax revenue narrowed to 23 per cent in June, suggesting some pick-up in the economy after the restrictions were eased beginning 1 June. Central GST decline for June was 14.8 per cent.