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62 Economic Survey 2021-22

Trends in Expenditure

2.27 The expenditure policy during the pandemic year 2020-21 was focused on prioritisation of
expenditure according to evolving situation. In the initial phase of the pandemic, the Government
ensured that funds were made available for essential activities and that scarce resources were
conserved for re-prioritisation. With the easing of movement and health-related restrictions later
in the year, expenditure was focused in sectors with the most positive effect on the economy,
either in terms of re-kindling growth or meeting welfare needs. Second to pandemic relief, the
Government placed maximum priority on productive domestic capital expenditure which has a
high multiplier effect on the economy.

2.28 In the wake of the pandemic, the additional expenditure requirements led to a YoY growth
of more than 30 per cent in the revenue expenditure of the Government in 2020-21 PA (Table 5).
Expenditures on salaries, pensions and interest payments are, by and large, committed in nature and
have limited headroom for creation of additional fiscal space. The decline in salaries during 2020-21
PA was largely due to freezing of the additional installment of Dearness Allowance to Government
employees and disruptions in hiring. Nearly 60 per cent of the increase in revenue expenditure during
2020-21 PA was due to increase in major subsidies. The major subsidies registered a growth of over
200 per cent in 2020-21 PA over 2019-20. This increase was driven by almost 400 per cent growth
in food subsidies from ` 1.09 lakh crore in 2019-20 to ` 5.25 lakh crore in 2020-21 PA. The steep
rise in food subsidy bill was on account of Pradhan Mantri Garib Kalyan Ann Yojana introduced as
part of the Economic Response to COVID-19, and the pre-payment of around ` 1.5 lakh crore of
outstanding food subsidy related loans of the Food Corporation of India.

Table 5: Major Items of Revenue Expenditure
2020-21 2021-22
Items 2016-17 2017-18 2018-19 2019-20
PA BE
(in ` lakh crore)

16.91 18.79 20.07 23.51 30.86 29.29
Revenue Expenditure of which
(9.9) (11.1) (6.8) (17.1) (31.3) (-5.1)
1.77 1.94 2.11 2.28 2.05 2.52
a. Salaries (pay & allowances)
(22.6) (9.3) (9.0) (7.8) (-10.0) (22.9)

1.31 1.46 1.60 1.84 2.09 1.90
b. Pensions
(35.8) (10.9) (9.9) (14.8) (13.7) (-9.0)
4.81 5.29 5.83 6.12 6.82 8.10
c. Interest payment
(8.8) (10.0) (10.2) (5.0) (11.4) (18.7)
2.04 1.91 1.97 2.28 6.90 3.35
d. Major subsidies
(-15.6) (-6.3) (2.9) (16.0) (202.0) (-51.4)
1.65 1.86 1.96 2.08 2.06 2.12
e. Defence Services
(13.3) (12.5) (5.1) (6.1) (-0.9) (3.1)
Source: Union Budget Documents & CGA
BE: Budget Estimate, PA: Provisional Actuals
Numbers in parenthesis are growth rates
*The figure for Salaries (Pay & allowances) for 2020-21 is Revised Estimate (RE).