Pandemic forces government to spend 431% more than its income!

Published on / By M. Pattabiraman Twitter: @pattufreefincal

Published: August 3, 2020 at 10:05 am

Last Updated on December 29, 2021

The consolidated monthly Account of the Union Government of India up to the month of June 2019 for the Financial Year 2019-20 was recently released. The total spending is Rs. 8,15,944 crore. This is 431% more than its total revenue!

The Government of India has received Rs.1,53,581 crore up to June 2020. This is one-sixth of total receipts up to Oct 2019. Readers may recall our earlier warning which seems to be coming true fast than we can afford: Post-lockdown govt debt may be set back by 17 years! 

Out of Rs.1,53,581 crore receipts,  88% is from tax revenue; 10% non-tax revenue; 2% is from the recovery of loans;  The total expenditure incurred is a whopping 431% of the total revenue. Out of the total expenditure up to June 2020, a good 20% goes to service debt via interest payments. Another 10% is due to major subsidies.

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The receipts in three months of FY 2020-21 are only 16.4% of total receipts in the first seven months of FY 2019-2020. The government has already spent 49% of what it did bet April-Oct 2019.

The only heartening data we could spot is the revival in GST collections. GST collection in April 2020 was only 28% of what it was in April 2019. In July 2020 it had recovered to 85% of what it was in the same month last year.

Trend in GST Collections from April to July 2020 with corresponding data for 2019
The trend in GST Collections from April to July 2020 with corresponding data for 2019. Source: Press Information Bureau 1st Aug 2020

The pandemic has forced the government to spend more at a time when it was also forced to earn less. Let us hope the situation quickly becomes better. Readers may recall even during a “normal” financial year, the government was already spending more than its receipts: In 2019-20 Government has so far spent 77% more than its income! Readers interested in understanding the different heads of income and expenditure for the government may consult this article.

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Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or Linkedin or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation for promoting unbiased, commission-free investment advice.
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