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44 Economic Survey 2021-22

of Public Sector Enterprises. The privatisation of Air India has been particularly
important, not only in terms of garnering disinvestment proceeds but also for boosting
the privatisation drive.

The expenditure policy of the central government during 2021-22 has a strong emphasis
on capital expenditure. The Budget 2021-22 had not only enhanced the expenditure
estimates but also directed them towards more productive capital expenditure. The capital
expenditure shows an increasing trend over the first three quarters of 2021-22. During
April- November 2021, the capital expenditure has grown by 13.5 per cent (YoY), with
focus in infrastructure-intensive sectors like roads and highways, railways, and housing
and urban affairs. This increase is particularly substantial given the high YoY growth in
capital expenditure registered during the corresponding period of the previous year as
well. In addition, the Centre has also put in place several incentives to boost the capital
expenditure by the States.

On account of a sustained revenue collection and a targeted expenditure policy by the
Government of India, the fiscal deficit for April to November 2021 has been contained
at 46.2 per cent of BE which is nearly one third of the proportion reached during the
same period of the previous two years (135.1 per cent of BE in April-November 2020 and
114.8 per cent of BE in April-November 2019). The fiscal deficit budgeted in the current year
was more realistic as it brought in several off-budget items to within the budget allocation
such as the food subsidy requirements of FCI. With the enhanced borrowings on account
of COVID-19, the Central Government debt has gone up from 49.1 per cent of GDP in
2019-20 to 59.3 per cent of GDP in 2020-21, but is expected to follow a declining trajectory
with the recovery of the economy. The General Government finances are also expected
to witness a consolidation during 2021-22, after the uptick in deficit and debt indicators
during the pandemic year 2020-21.

INTRODUCTION

2.1 Over the last two years, fiscal policy has remained a significant tool for addressing the
economic fallout of the pandemic. Government of India has adopted a calibrated fiscal policy
approach to the pandemic, which had the flexibility of adapting to an evolving situation in order
to support the vulnerable sections of society/firms and enable a resilient recovery. India’s unique
agile policy response differed from the waterfall strategy of introducing front-loaded stimulus
1
packages, adopted by most other countries in 2020. Such an adaptive approach has now been
widely accepted in the policy circles (IMF Fiscal Monitor October 2021).

2.2 This chapter reviews the fiscal developments in India in the aftermath of the pandemic
outbreak. It begins with fiscal policy strategy and performance of the fiscal parameters in the
current year 2021-22, followed by a detailed analysis of the medium to long-term trends in
Central, State and General Government finances. The chapter concludes with a discussion on
policy measures to enhance efficiency of Government spending.

1 Waterfall strategy as explained in chapter 1 of the Survey