States' fiscal deficit 36.5% of budget estimate in first quarter of FY21

On an aggregate basis, total receipts of states contracted 18.2 per cent YoY in 1QFY21, following 2.1 per cent decline in 1QFY20 and 1.6 per cent growth in 4QFY20.

Total spending stood at 18.4 per cent of budget estimate (BE), similar to that in previous years. Against a collapse in receipts, total expenditure in these states grew modestly by 2.7 per cent YoY in 1QFY21. This was in contrast to growth of 1.1 per cent seen in the corresponding quarter last year and decline of 7.4 per cent in 4QFY20.

As a result of the combination of lower receipts and higher spending, the aggregate fiscal deficit of 14 states accounting for 63 per cent of all states - stood at 36.5 per cent of BE in the first quarter. This is more than double the average of 16 per cent seen during the previous three years.

Due to the lockdown imposed on account of COVID-19, total taxes collected by the states, including devolution from the centre (which accounted for 64 per cent of all receipts in 1QFY21), declined by almost a third in 1QFY21. Similarly, states' own non-tax revenue receipts also declined 27 per cent YoY in the first quarter.

Aggregate revenue spending in 14 states grew 9.7 per cent YoY in 1QFY21, following 2.7 per cent YoY growth in 1QFY20 and 6.1 per cent YoY decline in 4QFY20. On the contrary, states' aggregate capital spending (including loans and advances) contracted 43.5 per cent YoY in 1QFY21, marking the fourth decline in the past five quarters

Interest payments grew 24 per cent YoY. Details regarding revenue spending suggest that interest payments, accounting for 12 per cent of revenue spending, grew 23.7 per cent.