The fiscal deficit has now exceeded the Budget estimate in the first four months (April-July of FY 21) due to lower tax collection, according to the data released by the Controller General of Accounts (CGA) on Monday. Fiscal deficit generally occurs due to revenue deficit or a hike in capital expenditure. Capital expenditure here refers to the cost incurred to create long-term assets such as roads, factories, buildings, and other development initiatives taken by the government. It is usually financed through borrowing from the central bank of the country or by raising money from capital markets by issuing different instruments like treasury bills and bonds.

The budget pegged the fiscal deficit at Rs.7.96 lakh crore; which is 3.5% of GDP. The center has announced additional borrowing of Rs.4 lakh crore; which will take the deficit up to 6%, which is yet to be approved by the parliament; which will then officially raise the deficit bar for the current fiscal year. According to the data, the expenditure increased a bit to 34.7% during the April-July period. But, the tax collection went down by nearly 30%. This resulted in fiscal deficit touching Rs.8 lakh crore, which is 103% of the budget estimate, against 77.8% registered during the first quarter of FY20.

During this period, food, petroleum, and nutrient-based fertilizers saw a decline in subsidy payout. Food subsidy is 49% of the Budget estimate against 59% recorded during the corresponding period of the last fiscal year. That is despite the higher quantity of subsidized food currently being distributed during the COVID-19 Pandemic. Petroleum subsidy came down to 40% of the budget estimate against 70% recorded during the corresponding period of the last fiscal year.