Govt spending grows 53% YoY in February, but it’s still not enough


The centre has stepped up spending further in the eleventh month of fiscal 2021. Government expenditure grew almost 53 per cent in February on a year-on-year (y-o-y) basis compared to a 49 per cent growth in January. This was by far the highest monthly growth in the financial year 2021 on a yearly basis. It was primarily led by 61.3 per cent increase in revenue expenditure as capex spends deaccelerated to nearly 17 per cent during the month versus a huge y-o-y jump of 335.1 per cent in the previous month.  

With this robust spending, total expenditure during Apr-Feb’21 rose to 14.3 per cent, y-o-y, against 11 per cent until Jan’21.  The capex grew at 33 per cent to Rs 4.04 lakh crore reaching 92 per cent of the revised estimates up to Feb’21 compared to 87 per cent last year.  According to a report by JM Financial, “Although capex growth has slowed in Feb’21, FYTD21 remains at 33 per cent y-o-y versus 35 per cent until Jan’21. This has been directed to states, defence, roads and food distribution.”

Of the total expenditure year-to-date, 20 per cent was directed towards interest payments, 15 per cent towards defence, and 11 per cent on rural sector.

On prospects of meeting the revised expenditure target, the report highlights that the total expenditure in March could expand 186 per cent, y-o-y against 53 per cent increase in February. “Total expenditure (excluding interest payments) would expand 305 per cent and capex must expand 6 per cent y-o-y,” it said.

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Centre’s receipts growth during the month turned negative first time after October’20-it declined 11.1 per cent on a yearly basis. Overall receipts growth in the first eleven months of the fiscal stood at -1.1 per cent compared to 6.8 per cent rise in the corresponding period last year.

The centre’s cumulative fiscal deficit touched 76 per cent of the revised deficit until February against 135.2 per cent last year, financed primarily by market borrowings worth Rs 13.6 lakh crore. Going forward, despite positive surprise expected in tax revenues, and healthy cash balance, the centre has decided to continue with its borrowing plan of Rs 12.1 lakh crore in FY22. In line with expectations, it plans to borrow 60 per cent of this in H1FY22, the report said.