States see sharp rise in fiscal and revenue deficits in Q1 of FY 2020-21: Ind-Ra

Economy


The states saw a sharp rise in their fiscal and revenue deficits during the first quarter of the current fiscal largely on account of weaker revenues, according to an analysis of the finances of 18 states by India Ratings and Research (Ind-Ra).

While their aggregate fiscal deficit reached 40.7% of the budgeted amount for FY21 against 13.4% for the same period last year, the total revenue deficit hit 285% of this year’s budget estimate against 12.9% a year ago.

The states relied on a combination of expenditure compression, higher market borrowings and devolution from the Centre to stay fiscally afloat, Ind-Ra said, in the report released on Thursday.

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Within the collective 11.7% increase in revenue expenditure of these states for the April-June quarter of this year over the last, there was a 10.5% annual reduction in expenditure on salary and pension, a 40% dip for subsidies and a 42% shrinkage in capital expenditure, it said.

However, this was accompanied by a 40% annual increase in spending under the head ‘other expenditure’, which included expenditure on public health and administrative measures, the report said

These states saw an 18.4% yearly contraction in revenue receipts for the first quarter, it said, but noted that there were large variations between states with some even reporting an increase.

For instance, Tamil Nadu saw a 23% fall in revenue receipts from Rs 38,000 crore in the first quarter FY20 to Rs 29,200 crore in FY21. On the other hand, Andhra Pradesh witnessed a 35% increase in this figure from Rs 15,600 crore last year to Rs 21,000 crore this year.

The reason behind such large variations was the increase in grants from the central government during the first quarter, according to the report, from Rs 52,620 crore in FY20 to Rs 80,400 crore in FY21.

“In general, the own tax and own non-tax revenue of all states in 1QFY21 has been lower than 1QFY20 and the share in central taxes is nearly at the same level. But, the grants received by states were higher in 1QFY21 than in 1QFY20,” Ind-Ra said.



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