Govt Spending Up By Just 11% in April-July from Last Year Despite Covid-led Disruptions: Report

Despite the mega economic package of Rs 20 lakh crore to overcome Covid-led disruption, official data shows that Centre’s total expenditure in April-July increased by about Rs 1.07 lakh crore, or about 11.3 per cent — up from Rs 9.47 lakh crore in April-July last year.

According to a report in The Indian Express, much of this expenditure was on revenue account like payment of salaries and other regular expenses.

As per the latest data released by the Finance Ministry, “(during April-July 2020), total expenditure incurred by the Government of India is Rs 10,54,209 crore, of which Rs 9,42,360 crore is on revenue account and Rs 1,11,849 crore is on capital account. Of the total revenue expenditure, Rs 1,98,584 crore is on account of interest payments and Rs 1,04,638 crore is on account of major subsidies.”

The Rs 20 lakh crore Atma Nirbhar Bharat package relied on liquidity measures injected by the RBI, cash transfers to the poor and needy, as well as medium-term structural measures. But the fiscal push has been small.

Even the RBI, in its annual report for the year 2019-20, released last month, noted that investment activity has further weakened, and suggested, “targeted public investment” funded by asset monetisation and privatisation of major ports to revive the economy.

Against the backdrop of GDP contraction, experts said that a government-led spending thrust is required to revitalise the economy. Notably, on Monday, the National Statistical Office (NSO) said GDP contraction in the April-June period of FY21 was the largest slump on record since India started reporting quarterly data in 1996. DK Pant, chief economist at India Ratings and Research told the publication that the government needs to put money into the pockets of the consumer and added that it should not come in the form of tax cuts.

Investment activity, as measured by Gross Fixed Capital Formation, contracted by nearly 47 per cent during the April-June quarter. Finance Ministry officials have maintained that they will take measures going forward as the impact of the pandemic will require regular intervention. The government held several discussions last month on pushing infrastructure spending to revive the economy.