2021 in numbers: Central government’s receipts
The Covid-19 pandemic has taken a toll on livelihoods as well as human life. As earlier stories in this series have shown, it has hurt jobs and incomes. There is a view among economists that this strain put on livelihoods by the pandemic, which continues to a lesser degree in even the current financial year because of new variants of the Sars-CoV-2 virus, can be reduced by the government putting money in the hands of the people. Any government’s capacity to spend, however, depends on how much it earns. The central government’s receipts also took a hit in the last financial year. This is what receipts look like in the current financial year that began in April.
According to the Union budget presented in February, the central’s government receipts in 2020-21 suffered a big blow. The government had expected to raise ₹22.46 lakh crore in the last financial year, if we exclude the amount that it planned to raise by borrowing. This would have been 28% more than in 2019-20. It ended up making only ₹16.02 lakh crore, 8.6% less than the receipts of ₹22.46 lakh crore in 2019-20. Therefore, it moderated its expectations of receipts for 2021-22 to just ₹19.76 lakh crore, 12% less than it had budgeted for before the pandemic in the February of 2020-21. However, data from the controller general of accounts (CGA) shows that by the end of this financial year, the union government’s receipts, even without borrowings, might exceed its expectations in the budget. With about 40% of this fiscal year yet to go in October, the latest period up to which data is available, the union government’s total receipts without borrowings were only 35% short of its budget estimates.
Tax revenue is the biggest component of the government’s receipts, making up to 80% of receipts without borrowings. It is not the case that any one kind of tax has helped in increasing receipts to a level beyond budget estimates. With seven of twelve months or 58% of the year past, collection of almost all kinds of major taxes is above 58% of the budget estimates for the year. Only income tax was at a slightly lower 55% of the budget estimate, which could be a result of the extension of deadlines.
Does this mean that the government will be able to spend more freely this year? That is likely to be the case. However, increased spending may not always provide the expected relief. Higher revenue and spending figures can also be achieved if inflation is high. If the price of manufacturing vehicles increases, sales and tax figures will rise even if the same number of vehicles are being sold. That means higher sales figures will not imply a higher real income or more employment; and higher tax and spending figures will not add any real income. As HT has explained before, a higher inflation has indeed contributed to the higher tax figures this fiscal year.