The output of the eight core sectors grew 8.9 per cent in June, mainly because of a low base effect and uptick in the production of natural gas, steel, coal and electricity.

The eight infrastructure sectors had contracted 12.4 per cent in June 2020 because of the lockdown restrictions.

The production of coal jumped 7.4 per cent against (-) 15.5 per cent; natural gas output was up 20.6 per cent compared with (-) 12 per cent.

Output of steel rose 25 per cent against (-) 23.2 per cent last year, while cement production rose 4.3 per cent against (-) 6.8 per cent last year.

Fiscal deficit

The Centre’s fiscal deficit in the April-June quarter was at an eight-year low of Rs 2.74 lakh crore, which is 18.2 per cent of the budgeted amount, because of better revenue collection and slower government spending

For the current financial year, the government expects fiscal deficit at 6.8 per cent of GDP, or Rs 15,06,812 crore.

In absolute terms, the fiscal deficit was at Rs 2,74,245 crore at the end of June.

For the current financial year, the government expects the fiscal deficit at 6.8 percent of GDP or Rs 15,06,812 crore. The fiscal deficit or the gap between expenditure and revenue for 2020-21 was 9.3 per cent of the Gross Domestic Product (GDP), better than the 9.5 per cent projected in the revised estimates in the Budget in February.

As per CGA data, the government received Rs 5.47 lakh crore (27.7 percent of corresponding BE 2021-22 of total receipts) up to June 2021. The amount comprises Rs 4.12 lakh crore of tax revenues, Rs 1.27 lakh crore of non-tax revenues and Rs 7,402 crore of non-debt capital receipts.

The receipts were 6.8 percent of BE at the end of June 2020. Non-debt capital receipts consist of recovery of loans worth Rs 3,406 crore and disinvestment proceeds of Rs 3,996 crore.

Aditi Nayar, chief economist, ICRA said, “The sharp jump in tax and non-tax receipts and mild contraction in revenue expenditure, curtailed the Government of India's (GoI’s) fiscal deficit to an eight year low Rs. 2.7 trillion in Q1 FY2022, less than half of last-year's level of Rs. 6.6 trillion recorded during the nationwide lockdown.”

Madan Sabnavis, chief economist, Care Ratings said, “Revenue generation has been better this year which is a comfort. Tax and non-tax revenue collections have been more buoyant this year. The RBI transfer which came in has also helped to attain over half of the target for non-tax revenue. The government has been slower on total expenditure which includes even capex. In terms of proportion of budgeted amounts, the spending has been lower for fertilizers, roads, while that for agriculture and food has just about been maintained.”

Further, Rs 1,17,524 crore was transferred to state governments as devolution of share of taxes by the Government of India up to June 2021. At the end of June, CGA said that total expenditure incurred by the government was Rs 8.21 lakh crore (23.6 percent of corresponding BE 2021-22).

Out of the total amount, Rs 7.10 lakh crore was on revenue account and Rs 1.11 lakh crore was on capital account. Out of the total revenue expenditure, Rs 1.84 lakh crore was for interest payments and about Rs 1 lakh crore was on account of major subsidies.

“Change in accounting year of Reserve Bank of India has helped in higher non-tax revenue collection and its growth jumped to 738.4% in 1QFY22 which is 52.4% of FY22 (BE). If government fails to achieve big-ticket disinvestment programme in FY22, the gains visible in the 1QFY22, may not hold and government would find it difficult to attain FY22 fiscal deficit target of INR15.07 trillion,” Sunil Kumar Sinha, Principal Economist, India Ratings and Research said.

Core

The output of eight core sectors grew 8.9 per cent in June, mainly due to a low base effect and uptick in production of natural gas, steel, coal and electricity, official data released today showed. The eight infrastructure sectors of coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity had contracted by 12.4 per cent in June 2020 due to the lockdown restrictions imposed to control the spread of coronavirus infections.

In May this year, these key sectors had recorded a growth of 16.3 per cent, while it was 60.9 per cent in April.

According to the commerce and industry ministry data, production of coal, natural gas, refinery products, steel, cement and electricity jumped by 7.4 per cent, 20.6 per cent, 2.4 per cent, 25 per cent, 4.3 per cent and 7.2 per cent, respectively, in June 2021, as against (-) 15.5 per cent, (-) 12 per cent, (-) 8.9 per cent, (-) 23.2 per cent, (-) 6.8 percent and (-) 10 per cent in the same month last year.

The crude oil output contracted by 1.8 per cent during the month under review as against a negative growth of 6 per cent in June 2020. Fertiliser segment recorded a growth of 2 per cent in June.

During April-June period this fiscal, the eight sectors grew by 25.3 per cent against a contraction of 23.8 per cent in the same period last year.

“While the core index rose in MoM terms in June 2021, it remained below the April 2021 level, particularly on account of cement, electricity and petroleum products, consistent with the picture of an incomplete recovery revealed by various other high frequency indicators. Moreover, the core sector index in June 2021 was a moderate 4.7% lower than the pre-covid level of June 2019, on account of all the components except fertilisers and natural gas,” Aditi Nayar, chief economist, ICRA said.

She said, “We expect the IIP to expand by 12-17% in June 2021, exceeding the core sector growth, as some of the other high frequency indicators such as GST e-way bills and auto output have displayed a solid sequential uptick in that month, engendered by the relaxation of state level restrictions. Continued unlocking by the states, improved mobility and higher electricity demand, pushed up in part by the lull in rainfall, are expected to boost the core sector growth to 11-14% in July 2021.”