Government spending grew 2% YoY in FY21: MOFSL

Government spending grew 2% YoY in FY21: MOFSL
Representational ImageSource: Ahmad Ardity from Pixabay

New Delhi: Terming FY21 as an 'exceptional year' MotilalOswal Financial Services (MOFSL) in a report say government spending grew 2 per cent last fiscal.

In FY21, India's real GDP contracted 7.3 per cent marking the worst fall in the past seven decades. "Our calculations suggest that while real spending by the private sector fell 10 per cent in FY21, government spending grew 2 per cent in real terms." Consequently, while the private sector deducted 8.7 percentage points from the real GDP growth, the government added 0.3pp in FY21.

"Of this, real government investments declined for the second consecutive year, while real consumption grew 2.9 per cent YoY in FY21." Besides, it cited that combined fiscal deficit was at an all-time high of 13.3 per cent of GDP in FY21. "Our calculation of the combined fiscal deficit of the center and states indicates it rose to 13.3 per cent of GDP in FY21, against a combined fiscal deficit of 7 per cent of GDP in FY20."

"This was the highest fiscal deficit seen in the past three decades." Furthermore, based on the provisional data of 18 states, it said: "Out calculations suggest the total spending by the states grew 5.8 per cent in FY21, following growth of 3 per cent FY20 - the slowest in three decades."

"Notably, states' spending growth has been below 6 per cent three times in the last four years, vis-a-vis the pre-GST lowest growth of 7.2 per cent in FY02." In addition, it said that states' fiscal deficit was at a 17-year high in FY21.

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