Page 426 - ES 2020-21_Volume-1-2 [28-01-21]

Fiscal Developments 53

15% of their budget in each of the first two quarters. However, even in Category B and C
Ministries, spending on domestic capital expenditure was permitted beyond these ceilings. This
categorization enabled the Government to ensure that funds for essential activities were made
available in full despite a sharp contraction in revenue receipts, and that scarce resources were
conserved for re-prioritisation.

2.6 With effect from the third quarter, the spending ceilings were relaxed on the basis of
revised full year allocations. The revised allocations reflected a substantial re-prioritisation of
expenditure to those sectors with the most positive effect on the economy, either in terms of
re-kindling growth or meeting welfare needs. Ministries were allowed to decide the timing of
expenditure within the revised allocation. Despite the absence of curbs on capital expenditure,
the pace of capital expenditure was restrained in the first two quarters on account of movement
restrictions in containment zones, and unwillingness or inability of contractors and workers to
carry out works.

2.7 With the easing of movement and health-related restrictions in the third quarter, the pace of
government expenditure has picked up sharply. Second to pandemic relief, the Government has
placed maximum priority on productive domestic capital expenditure which has a high multiplier
effect on the economy. The capital expenditure for April to December 2020 (Flash) stood at
2
` 3.17 lakh crore, 24 per cent higher than the capital expenditure during the corresponding
period in the previous year. The total expenditure also recorded a YoY growth of 11 per cent,
increasing from ` 21.1 lakh crore during April to December 2019 to ` 23.4 lakh crore during
April to December 2020 (Flash). An analysis of the monthly expenditure also shows that the
total expenditure registered an increase during the last three months of the year 2020 by 9.5
per in October, 48.3 per cent in November and 50.2 per cent in December (Flash) compared to
the same months in the previous year. Moreover, the capital expenditure during the last three
months of the year 2020 recorded a phenomenal growth of 129.5 per cent in October, 248.5
per cent in November and 81.9 per cent in December (Flash) as compared to same months in
previous year (Figure 1). It can clearly be seen that by timing the expenditure push, especially
the capital expenditure, after the reduction in health-related curbs, the growth “bang” for the
fiscal buck has been maximized.

Figure 1: Growth (YoY) in monthly Expenditure during FY 2020-21
300%
249%
250%
200%
150% 116% 129%
100% 82%
57%
50%
0%
-7%
-50% -21%
-47% -39%
-100%
Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec 20
(Flash)
Growth in Capital Expenditure Growth in Revenue Expenditure
Source: Department of Expenditure
2 Flash figures from Office of CGA as on 11 January 2021.
th