Overview.

Despite shifting geopolitical realities around the world, the Indian economy is expected to
grow by 7.1-7.6 percent this fiscal year, according to a study released on Wednesday. India
has experienced significant insecurity as a result of changing foreign scenarios such as the
Ukraine war. Morgan Stanley believes that India's worst period of macroeconomic turbulence
is coming to an end. Retail inflation is expected to be 7-7.2 percent in August 2022 and to
remain there in September 2022 before declining gradually.

Fiscal Policy of India

The Indian government releases the Union Budget each year for that particular fiscal year.
The Union Budget includes a complete summary of all expenses and income generated in
India for the specified fiscal year.
The costs can be divided into two categories: revenue costs and capital costs.
Revenue Expenditure: All routine administrative costs, such as salaries and wages, pensions,
interest payments, maintenance and repairs, are included in revenue expenditure.
Furthermore, overhead expenses such as rent, taxes, and other establishment expenses

Capital Expenditure: Asset Creation and Capital Expenditure Asset creation is linked to
capital expenditure. This is the cost of purchasing tangible assets such as real estate,
buildings, machines, and other physical infrastructure. Capital expenses also include
disbursements, which include repayment of the government's debt as well as loans and
advances to other organisations.

FISCAL POLICY STRATEGY IN THE AFTERMATH OF THE

PANDEMIC OUTBREAK

 In the midst of a pandemic situation, the government's flexible fiscal policy response
included a change in the mix of stimulus measures. During the early stages of the
epidemic, the fiscal strategy was centred on creating safety nets for society's most
vulnerable and underprivileged members in order to protect them from the worst-case
scenarios. Stimulus measures that ensured the provision of necessities, such as direct
benefit transfers to the most vulnerable groups, emergency financing to small
businesses, and the world's largest food subsidy programme, made the development of
safety nets possible. Then, from 2020 to 21st, a series of stimulation programmes
were implemented, each one guided by a Bayesian updating of information as the
situation changed.

 Building on the same methodology, the Union Budget 2021-22 increased budget
outlays for more productive capital expenditure. To maintain its focus on the National
Infrastructure Pipeline, the government budgeted a 34.5% increase in capital
expenditures for 2020-21 BE, with a focus on railways, highways, urban
transportation, power, telecom, textiles, and affordable housing. The National
Infrastructure Pipeline, which previously covered 6835 projects, was expanded to
7400 projects in the budget for 2021-22. PLI initiatives for 13 sectors were introduced
 in Budget 2021-22, with an outlay of '1.97 lakh crore, for a five-year period beginning
in 2021-22, in order to harness domestic manufacturing potential across sectors such
as renewable energy, heavy industry, agricultural, automotive, and textiles.

 This increased emphasis on capital spending in the second half of the 2020-21 fiscal
year reflects the Indian government's responsive fiscal policy in response to COVID-
19. Because of mobility restrictions in containment zones and the refusal or inability
of contractors and personnel to complete the work, quarterly capital spending was
constrained during the first two quarters of 2020-21. Capital spending was increased
in Q3 of 2020-21 to encourage investment in industries with the greatest economic
impact. Travel and health-related restrictions were relaxed. Given the increase in
capital expenditures during the first three quarters of fiscal 2021-2022, the emphasis
on capital spending has remained.

Trends in Quaterly Capex.

Source: CGA monthly Accounts

Fiscal Developments in 2021-22

In terms of Revenue

In contrast to the 9.6 percent increase predicted in the 2021-22 Budget Estimates,
revenue receipts have increased by 67.2 percent year over year, according to the
2021-2022 Economic Survey. According to the table below, the Central Government's
financial situation improved between April and November 2021 as a result of
increased revenue collection and capital expenditure spending allocations. Revenue
increased significantly faster in the last fiscal year (April to November 2021) than it
did in the previous two years. This achievement is due to significant growth in both
tax and non-tax revenue. Firms' increasing profitability, the formalisation of the
economy, and improved compliance as a result of tax changes are a few of the factors
that could have contributed to this increase in corporate tax collection. According to
the RBI, the industrial sector's gross earnings increased by 132.5 percent during the
first quarter of 2021-2022, while the IT sector's increased by 21.5 percent.
Manufacturing sector gross profits increased by 39.7% in the following quarter, Q2 of
2021-2022, while IT sector gross profits increased by 18.4%. The Indian
government's recent implementation of a number of tax administration and policy
reforms has also contributed to the increase in compliance.

Over the first eight months of the previous fiscal year, indirect tax revenue increased
by 38.6%. As a result of the manufacturing sector's recovery and consumer demand,
an increase in imports of goods and services has resulted in an increase in customs
collection. Customs revenue increased by more than 65% from April to November
2021 compared to April to November 2019 and by nearly 100% compared to April to
November 2020. Excise duty revenue increased by 23.2% year on year between April
and November 2021.

With the economy picking up, the GST has become a significant source of revenue
for both the federal government and state governments. The Centre's GST receipts
from April through November 2021 made up 61.4% of the Budget Estimate. Center
and State gross GST collections from April to December 2021 was 10.74 lakh crore,
up 61.5 percent from April to December 2020 and 33.7 percent from April to
December 2019.

In terms of Expenditure

Expenditures The government's expenditure programme for 2021-22 is defined by

reorganising and prioritising expenditures in sectors that will have a long-term impact
on output. Between April and November 2021, the government's total spending
increased by 8.8%, accounting for 59.6% of the budget's projected amount. When
compared to the first eight months of 2020-21, revenue spending increased by 8.2%,
while non-interest revenue expenditures increased by 4.6% from April to November
of the same year.
The cost of essential subsidies from April to November 2021 was 2.31 lakh crore.
Food subsidies, which account for the majority of overall subsidies, were two-thirds
of their Budget forecast level, or 1.64 lakh crore, during the first eight months of
2021-22. Capital expenditures are prioritised in the current fiscal year's spending plan.
Capital expenditures increased by 13.5% and 28.5% from April to November 2020,
April to November 2018, and April to November 2021, respectively. This growth is
greater than the YoY growth in capital expenditures experienced over the same period
in the previous few years, as shown in Figure.

YoY growth in Capital Expenditure during April to November over

 Fiscal Deficit Trends

Source: Union Budget Documents and CGA

The structural deficit in revenue collection caused by the cessation of economic

activity, as well as the need for additional expenditures to mitigate the effects of the
pandemic on vulnerable populations, small businesses, and the economy as a whole,
put a tremendous strain on the government's meagre financial resources during fiscal
year 2020-21. As a result, the anticipated fiscal deficit for 2020-21 increased from
3.5% in the BE to 9.5% in the Revised Estimate. The budget deficit for 2020-21
Provisional Actuals was 9.2% of GDP, which was lower than the Revised Estimate.
High fiscal deficit-to-GDP ratio of 9.5% of GDP in the RE of 2021-22 was reported,
compared to the expected 3.5% in the BE of 2021-22. The fiscal deficit to GDP ratio
will be reduced to 4.5% by fiscal year (FY) 2025-26, according to a fiscal
consolidation plan. In 2021-22 RE, the revenue deficit to GDP ratio was 4.7%; in
2022-23 BE, it was 3.8%. In the actual fiscal year 2020-21, the revenue shortfall to
GDP ratio was 7.3%. During a pandemic, a significant income shortfall is required for
economic recovery. The "golden rule" of responsible spending and budgeting
(FRBM) demanded that the revenue gap be closed.

Budget at a Glance
Last 5 years
(In ₹ crores)

2020-2021 2021-2022 2021-2022 2022-2023

Actuals Budge Revised Budget
Estimates Estimates Estimates

1. Revenue Receipts 1633920 1788424 2078936 2204422

2. Tax Revenue (Net to Centre) 1426287 1545396 1765145 1934771
3. Non Tax Revenue 207633 243028 313791 269651

4. Capital Receipts ¹ 1875916 1694812 1691064 1740487

5. Recovery of Loans 19729 13000 21975 14291
6. Other Receipts 37897 175000 78000 65000
7. Borrowings and Other Liabilities² 1818291 1506812 1591089 1661196

8. Total Receipts (1+4) 3509836 3483236 3770000 3944909

9. Total Expenditure (10+13) 3509836 3483236 3770000 3944909

10. On Revenue Account 3083519 2929000 3167289 3194663
of which
11. Interest Payments 679869 809701 813791 940651
12. Grants in Aid for creation 230865 219112 237685 317643

of capital assests
13. On Capital Account 426317 554236 602711 750246
14. Effective Capital Expenditure (12+13)³ 657182 773348 840396 1067889

15. Revenue Deficit (10-1) 1449599 1140576 1088352 990241

(7.3) (5.1) (4.7) (3.8)
16. Effective Revenue Deficit 1218734 921464 850667 672598
(15-12) (6.2) (4.1) (3.7) (2.6)

17. Fiscal Deficit 1818291 1506812 1591089 1661196

[9-(1+5+6)] (9.2) (6.8) (6.9) (6.4)

18.Primary Deficit 1138422 697111 777298 720545

(5.8) (3.1) (3.3) (2.8)

2017-2018 2018-2019 2018-2019 2019-2020

Budget Revised Budget
Actuals Estimates Estimates Estimaes

1435233 1725738 1729682 1977693

1. Revenue Receipts 1242488 1480649 1484406 1705046

2. Tax Revenue (Net to Centre) 192745 245089 245276 272647

3. Non Tax Revenue

706742 716475 727553 806507
4. Capital Receipts ¹ 15633 12199 13155 12508
 5. Recovery of Loans 100045 80000 80000 90000
6. Other Receipts 591064 624276 634398 703999

7. Borrowings and Other Liabilities²

2141975 2442213 2457235 2784200
8. Total Receipts (1+4)
2141975 2442213 2457235 2784200
9. Total Expenditure 1878835 2141772 2140612 2447907
10. On Revenue Account
of which 528952 575795 587570 665061
11. Interest Payments 191034 195345 200300 200740

12. Grants in Aid for creation 263140 300441 316623 336293

13. On Capital Account 443602 416034 410930 470214
14. Revenue Deficit 252568 220689 210630 269474

15. Effective Revenue Deficit 591064 624276 634398 703999

16. Fiscal Deficit 62112 48481 46828 38938

The facts presented here provide an overview of the Indian Union Budget from 2017-2018 to
2021-2022. When we look at the expenditure trajectory year over year, we can see that it has
risen. Spending for the 2018-2019 fiscal year increased by 14.04% over the previous fiscal
year. The government of India (GOI) has prioritised the growth of a number of industries,
including agriculture, rural development, defence, and the subsidiary industries of food and
fertilisers, where it has made the most investments. There were two deadly lockdowns in
2020 and 2021, which disrupted India's economy. The immunisation drives posed the greatest
challenge to the Indian government in 2021. As a result, we can see a 14.5% increase in
spending and a significant reduction in production and immunisation campaigns throughout
India.

Expenditure of Government of India

2019-2020 2020-2021 2020-2021 2021-2022

Actuals Budget Revised Budget

Estimates Estimates Estimates

Centre's Expenditure
Establishment Expenditure 570244 609585 598672 609014
 Central Sector Schemes/Projects 757091 831825 1263690 1051703

Other Central Sector Expenditure of which 727025 887574 826536 1011887

Interest Payments 612070 708203 692900 809701

Transfers
Centrally Sponsored Schemes 309553 339895 387900 381305
Finance Commission Grants 123710 149925 182352 220843
Other Grants/Loans/Transfers 198707 223427 191155 208484
Grand Total 2686330 3042230 3450305 3483236

Source: https://www.indiabudget.gov.in/budget2021-22/index.php

Income of Government of India

GOI receive revenue in terms of various taxes that are imposed in multiple sectors. Below are
the data attached for the incomes of year 2021-2022.
2019-2020 2020-2021 2020-2021 2021-2022
Actuals Budget Revised Budget
Estimates Estimates Estimates
REVENUE RECEIPTS
Tax Revenue
Gross Tax Revenue 2010059 2423020 1900280 2217059
a. Corporation Tax 556876 681000 446000 547000
b. Taxes on Income 492654 638000 459000 561000
c. Wealth Tax 20 .. .. ..
d. Customs 109283 138000 112000 136000
e. Union Excise Duties 240615 267000 361000 335000
f. Service Tax 6029 1020 1400 1000
g. GST 598750 690500 515100 630000
-CGST 494072 580000 431000 530000
-IGST 9125 .. .. ..
-GST Compensation Cess 95553 110500 84100 100000

h. Taxes of Union Territories 5835 7500 5780 7059

Less - NCCD transferred to the 2480 2930 5820 6100

NCCF/NDRF
Less - State's share 650678 784181 549959 665563
1a Centre's Net Tax Revenue 1356902 1635909 1344501 1545397

2. Non-Tax Revenue 327158 385017 210653 243028

Interest receipts 12349 11042 14005 11541
Dividends and Profits 186132 155396 96544 103538
External Grants 373 812 1422 747
Other Non Tax Revenue 126540 215465 96602 124671
Receipts of Union Territories 1762 2303 2081 2531

Total- Revenue Receipts (1a + 2) 1684059 2020926 1555153 1788424

3. CAPITAL RECEIPTS
A. Non-debt Receipts 68620 224967 46497 188000
 (i) Recoveries of loans and advances@ 18316 14967 14497 13000

(ii) Disinvestment Receipts 50304 210000 32000 175000

B. Debt Receipts* 928680 849340 1866013 1435428
Total Capital Receipts (A+B) 997301 1074306 1912510 1623428

4. Draw-Down of Cash Balance 4970 -53003 -17358 71383

Total Receipts (1a+2+3) 2681360 3095233 3467663 3411853

Receipts under MSS (Net) .. .. .. ..

Source: https://www.indiabudget.gov.in/budget2021-22/index.php