Fiscal Developments | Economic Survey & Government Reports - UPSC PDF Download

 Page 1


CHAPTER
02
In the backdrop of an evolving pandemic situation, Government of India’s agile policy 
response differed from the waterfall strategy of introducing front-loaded stimulus 
packages, adopted by most other countries in 2020. Immediately after the COVID-19 
outbreak, Government of India chose to first create safety-nets for the vulnerable sections 
of the society/ small businesses before going on to introduce stimulus packages to boost 
economic recovery in the second half of 2020-21. On the fiscal front, capital expenditure 
was restrained during Q1 and Q2 of 2020-21 owing to movement restrictions in 
containment zones, and unavailability of contractors/workers to carry out capital works. 
However, with the easing of movement and health-related restrictions, capital spending 
was pushed up in Q3 of 2020-21. Thus, the change in the mix of stimulus effected in 
2020-21 towards a larger share of capital spending, has continued in the current year as 
well. The stimulus measures announced so far during the year 2021-22 include liquidity 
enhancing and investment boosting measures such as the Production Linked Incentives 
scheme, credit guarantee schemes and export boosting initiatives. 
With the bouncing back of the economy in the current financial year, the revenue receipts 
of the central government during April to November 2021 have gone up by 67.2 per cent 
(YoY), as against an expected growth of 9.6 per cent in the 2021-22 Budget Estimates (over 
2020-21 Provisional Actuals). The buoyant tax collections of both direct and indirect taxes, 
along with the non-tax revenue boosted by RBI’ s surplus transfer to the Government, have 
contributed to the increase in the revenue pool. The gross tax revenue during this period 
has registered a growth of over 50 per cent in YoY terms. This performance is strong not 
only over the corresponding period of the previous year but also when compared to the 
pre-pandemic levels of 2019-20. The gross monthly GST collections have crossed the  
` 1 lakh crore mark consistently since July 2021, after quickly recovering from a dip 
in June 2021 following the second wave of COVID-19. The impact of the second wave 
of COVID-19 on GST collections was much more muted as compared to the first wave. 
The ongoing improvement in revenue performance during the current year can also be 
attributed to increased tax compliance enabled by various tax administration and policy 
reforms implemented by the Government in the past few years. 
The New Public Sector Enterprise Policy and Asset Monetisation Strategy introduced by 
the Government reaffirm its commitment towards privatization and strategic disinvestment 
Fiscal Developments 
Page 2


CHAPTER
02
In the backdrop of an evolving pandemic situation, Government of India’s agile policy 
response differed from the waterfall strategy of introducing front-loaded stimulus 
packages, adopted by most other countries in 2020. Immediately after the COVID-19 
outbreak, Government of India chose to first create safety-nets for the vulnerable sections 
of the society/ small businesses before going on to introduce stimulus packages to boost 
economic recovery in the second half of 2020-21. On the fiscal front, capital expenditure 
was restrained during Q1 and Q2 of 2020-21 owing to movement restrictions in 
containment zones, and unavailability of contractors/workers to carry out capital works. 
However, with the easing of movement and health-related restrictions, capital spending 
was pushed up in Q3 of 2020-21. Thus, the change in the mix of stimulus effected in 
2020-21 towards a larger share of capital spending, has continued in the current year as 
well. The stimulus measures announced so far during the year 2021-22 include liquidity 
enhancing and investment boosting measures such as the Production Linked Incentives 
scheme, credit guarantee schemes and export boosting initiatives. 
With the bouncing back of the economy in the current financial year, the revenue receipts 
of the central government during April to November 2021 have gone up by 67.2 per cent 
(YoY), as against an expected growth of 9.6 per cent in the 2021-22 Budget Estimates (over 
2020-21 Provisional Actuals). The buoyant tax collections of both direct and indirect taxes, 
along with the non-tax revenue boosted by RBI’ s surplus transfer to the Government, have 
contributed to the increase in the revenue pool. The gross tax revenue during this period 
has registered a growth of over 50 per cent in YoY terms. This performance is strong not 
only over the corresponding period of the previous year but also when compared to the 
pre-pandemic levels of 2019-20. The gross monthly GST collections have crossed the  
` 1 lakh crore mark consistently since July 2021, after quickly recovering from a dip 
in June 2021 following the second wave of COVID-19. The impact of the second wave 
of COVID-19 on GST collections was much more muted as compared to the first wave. 
The ongoing improvement in revenue performance during the current year can also be 
attributed to increased tax compliance enabled by various tax administration and policy 
reforms implemented by the Government in the past few years. 
The New Public Sector Enterprise Policy and Asset Monetisation Strategy introduced by 
the Government reaffirm its commitment towards privatization and strategic disinvestment 
Fiscal Developments 
44 Economic Survey 2021-22
INTRODUCTION
2.1	 Over	 the	 last	 two	 years,	 fiscal	 policy	 has	 rema ined	 a	 significant	 tool	 for	 addressing	 the	
economic	 fall out	 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
1
	 of	 introducing	 front-loaded	 stimulus	
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.
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  
1 14.8 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.
1
W aterfall	strategy 	as	explained	in	chapter	1	of	the	Survey
Page 3


CHAPTER
02
In the backdrop of an evolving pandemic situation, Government of India’s agile policy 
response differed from the waterfall strategy of introducing front-loaded stimulus 
packages, adopted by most other countries in 2020. Immediately after the COVID-19 
outbreak, Government of India chose to first create safety-nets for the vulnerable sections 
of the society/ small businesses before going on to introduce stimulus packages to boost 
economic recovery in the second half of 2020-21. On the fiscal front, capital expenditure 
was restrained during Q1 and Q2 of 2020-21 owing to movement restrictions in 
containment zones, and unavailability of contractors/workers to carry out capital works. 
However, with the easing of movement and health-related restrictions, capital spending 
was pushed up in Q3 of 2020-21. Thus, the change in the mix of stimulus effected in 
2020-21 towards a larger share of capital spending, has continued in the current year as 
well. The stimulus measures announced so far during the year 2021-22 include liquidity 
enhancing and investment boosting measures such as the Production Linked Incentives 
scheme, credit guarantee schemes and export boosting initiatives. 
With the bouncing back of the economy in the current financial year, the revenue receipts 
of the central government during April to November 2021 have gone up by 67.2 per cent 
(YoY), as against an expected growth of 9.6 per cent in the 2021-22 Budget Estimates (over 
2020-21 Provisional Actuals). The buoyant tax collections of both direct and indirect taxes, 
along with the non-tax revenue boosted by RBI’ s surplus transfer to the Government, have 
contributed to the increase in the revenue pool. The gross tax revenue during this period 
has registered a growth of over 50 per cent in YoY terms. This performance is strong not 
only over the corresponding period of the previous year but also when compared to the 
pre-pandemic levels of 2019-20. The gross monthly GST collections have crossed the  
` 1 lakh crore mark consistently since July 2021, after quickly recovering from a dip 
in June 2021 following the second wave of COVID-19. The impact of the second wave 
of COVID-19 on GST collections was much more muted as compared to the first wave. 
The ongoing improvement in revenue performance during the current year can also be 
attributed to increased tax compliance enabled by various tax administration and policy 
reforms implemented by the Government in the past few years. 
The New Public Sector Enterprise Policy and Asset Monetisation Strategy introduced by 
the Government reaffirm its commitment towards privatization and strategic disinvestment 
Fiscal Developments 
44 Economic Survey 2021-22
INTRODUCTION
2.1	 Over	 the	 last	 two	 years,	 fiscal	 policy	 has	 rema ined	 a	 significant	 tool	 for	 addressing	 the	
economic	 fall out	 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
1
	 of	 introducing	 front-loaded	 stimulus	
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.
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  
1 14.8 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.
1
W aterfall	strategy 	as	explained	in	chapter	1	of	the	Survey
45 Fiscal Developments 
FISCAL POLICY STRATEGY IN THE AFTERMATH OF THE 
PANDEMIC OUTBREAK
2.3	 The	 agil e	 fiscal	 polic y	 response	 adopted	 by	 Government	 of	 India	 encompassed	 a	 change	
in	 mix	 of	 the	 stimulus	 mea sures	 amidst	 an	 uncertain	 evolution	 of	 the	 pandemic	 situation.	 In	 the	
initial	 phase	 of	 the	 pandem ic,	 the	 fiscal	 policy	 focused	 on	 building	 safety-nets	 for	 the	 poor	 and	
vulnerable	 sections	 of	 society	 to	 hedge	 against	 the	 worst-case	 outcomes.	 Stimulus	 measures	 such	
as	 direct	 benefit	 transfers	 to	 the	 vulnerable	 sections,	 emer gency	 credit	 to	 the	 small	 businesses,	
and	 the	 world’ s	 lar gest	 food	 subsidy	 programme	 tar geting	 80.96	 crore	 beneficiaries	 enabled	
the	 creation	 of	 safety-nets,	 by	 ensuring	 that	 the	 essentials	 are	 taken	 care	 of.	 This	 was	 followed	
by	 a	 series	 of	 stimulus	 packages	 spread	 throughout	 the	 year	 2020-21,	 driven	 by	 a	 Bayesian	
updating	 of	 information	 as	 the	 situation	 evolved.	 W ith	 the	 restoration	 of	 economic	 activities,	 the	
fiscal	 response	 focused	 on	 stimulating	 demand	 in	 the	 economy .	 During	 this	 phase	 of	 economic	
recovery ,	 the	 stimulus	 mix	 included	 investment	 boosting	 measures	 like	 Production	 Linked	
Incentives	 (PLI),	 steps	 to	 encourage	 investment	 in	 infrastructure	 sector	 and	 enhancing	 capital	
expenditure	by	the	Central	and	state	Governments	( Figure 2 A to 2 D ).		
2.4	 This 	 enhanced 	 focus 	 on 	 capital 	 expenditure 	 in 	 the 	 second 	 half 	 of 	 the 	 year 	 2020-21 	 is 	 reflective 	
of 	 the 	 responsive 	 fiscal 	 policy 	 which 	 Government 	 of 	 India 	 has 	 adopted 	 against 	 COVID-19. 	 Due	
to 	 movement 	 restrictions 	 in 	 containment 	 zones, 	 and 	 unwillingness 	 or 	 inability 	 of 	 contractors 	 and	
workers 	 to 	 carry 	 out 	 works, 	 the 	 quarterly 	 capital 	 expenditure 	 was 	 restrained 	 during 	 the 	 first 	 two	
quarters 	of 	2020-21. 	 W ith 	the 	easing 	of 	movement 	and 	health-related 	restrictions 	 in 	Q3 	of 	2020-21,	
the 	 capital 	 spending 	 was 	 pushed 	 for 	 encouraging 	 expenditure 	 in 	 sectors 	 with 	 the 	 most 	 positive 	 effect 	
on 	 the 	 economy . 	 The 	 focus 	 on 	 capital 	 spending 	 has 	 been 	 sustained 	 during 	 the 	 current 	 fiscal, 	 as 	 the	
capital 	 expenditure 	 shows 	 an 	 increasing 	 trend 	 during 	 the 	 first 	 three 	 quarters 	 of 	 2021-22 	 (Figure 1).
Figure 1: Trends in quarterly capital expenditure
 
Lockdown
Post first wave 
ramp-up
Sustained capital 
spending
40
60
80
100
120
140
160
Q1-FY2019
Q2-FY2019
Q3-FY2019
Q4-FY2019
Q1-FY2020
Q2-FY2020
Q3-FY2020
Q4-FY2020
Q1-FY2021
Q2-FY2021
Q3-FY2021
Q4-FY2021
Q1-FY2022
Q2-FY2022
Q3-FY2022 (Est)
? Thousand crore
Source:	CGA 	Monthly	 Accounts
Note:	 The	estimate	for	Q3	FY2021-22	uses	flash	figures	for	Dec	2021.
Page 4


CHAPTER
02
In the backdrop of an evolving pandemic situation, Government of India’s agile policy 
response differed from the waterfall strategy of introducing front-loaded stimulus 
packages, adopted by most other countries in 2020. Immediately after the COVID-19 
outbreak, Government of India chose to first create safety-nets for the vulnerable sections 
of the society/ small businesses before going on to introduce stimulus packages to boost 
economic recovery in the second half of 2020-21. On the fiscal front, capital expenditure 
was restrained during Q1 and Q2 of 2020-21 owing to movement restrictions in 
containment zones, and unavailability of contractors/workers to carry out capital works. 
However, with the easing of movement and health-related restrictions, capital spending 
was pushed up in Q3 of 2020-21. Thus, the change in the mix of stimulus effected in 
2020-21 towards a larger share of capital spending, has continued in the current year as 
well. The stimulus measures announced so far during the year 2021-22 include liquidity 
enhancing and investment boosting measures such as the Production Linked Incentives 
scheme, credit guarantee schemes and export boosting initiatives. 
With the bouncing back of the economy in the current financial year, the revenue receipts 
of the central government during April to November 2021 have gone up by 67.2 per cent 
(YoY), as against an expected growth of 9.6 per cent in the 2021-22 Budget Estimates (over 
2020-21 Provisional Actuals). The buoyant tax collections of both direct and indirect taxes, 
along with the non-tax revenue boosted by RBI’ s surplus transfer to the Government, have 
contributed to the increase in the revenue pool. The gross tax revenue during this period 
has registered a growth of over 50 per cent in YoY terms. This performance is strong not 
only over the corresponding period of the previous year but also when compared to the 
pre-pandemic levels of 2019-20. The gross monthly GST collections have crossed the  
` 1 lakh crore mark consistently since July 2021, after quickly recovering from a dip 
in June 2021 following the second wave of COVID-19. The impact of the second wave 
of COVID-19 on GST collections was much more muted as compared to the first wave. 
The ongoing improvement in revenue performance during the current year can also be 
attributed to increased tax compliance enabled by various tax administration and policy 
reforms implemented by the Government in the past few years. 
The New Public Sector Enterprise Policy and Asset Monetisation Strategy introduced by 
the Government reaffirm its commitment towards privatization and strategic disinvestment 
Fiscal Developments 
44 Economic Survey 2021-22
INTRODUCTION
2.1	 Over	 the	 last	 two	 years,	 fiscal	 policy	 has	 rema ined	 a	 significant	 tool	 for	 addressing	 the	
economic	 fall out	 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
1
	 of	 introducing	 front-loaded	 stimulus	
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.
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  
1 14.8 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.
1
W aterfall	strategy 	as	explained	in	chapter	1	of	the	Survey
45 Fiscal Developments 
FISCAL POLICY STRATEGY IN THE AFTERMATH OF THE 
PANDEMIC OUTBREAK
2.3	 The	 agil e	 fiscal	 polic y	 response	 adopted	 by	 Government	 of	 India	 encompassed	 a	 change	
in	 mix	 of	 the	 stimulus	 mea sures	 amidst	 an	 uncertain	 evolution	 of	 the	 pandemic	 situation.	 In	 the	
initial	 phase	 of	 the	 pandem ic,	 the	 fiscal	 policy	 focused	 on	 building	 safety-nets	 for	 the	 poor	 and	
vulnerable	 sections	 of	 society	 to	 hedge	 against	 the	 worst-case	 outcomes.	 Stimulus	 measures	 such	
as	 direct	 benefit	 transfers	 to	 the	 vulnerable	 sections,	 emer gency	 credit	 to	 the	 small	 businesses,	
and	 the	 world’ s	 lar gest	 food	 subsidy	 programme	 tar geting	 80.96	 crore	 beneficiaries	 enabled	
the	 creation	 of	 safety-nets,	 by	 ensuring	 that	 the	 essentials	 are	 taken	 care	 of.	 This	 was	 followed	
by	 a	 series	 of	 stimulus	 packages	 spread	 throughout	 the	 year	 2020-21,	 driven	 by	 a	 Bayesian	
updating	 of	 information	 as	 the	 situation	 evolved.	 W ith	 the	 restoration	 of	 economic	 activities,	 the	
fiscal	 response	 focused	 on	 stimulating	 demand	 in	 the	 economy .	 During	 this	 phase	 of	 economic	
recovery ,	 the	 stimulus	 mix	 included	 investment	 boosting	 measures	 like	 Production	 Linked	
Incentives	 (PLI),	 steps	 to	 encourage	 investment	 in	 infrastructure	 sector	 and	 enhancing	 capital	
expenditure	by	the	Central	and	state	Governments	( Figure 2 A to 2 D ).		
2.4	 This 	 enhanced 	 focus 	 on 	 capital 	 expenditure 	 in 	 the 	 second 	 half 	 of 	 the 	 year 	 2020-21 	 is 	 reflective 	
of 	 the 	 responsive 	 fiscal 	 policy 	 which 	 Government 	 of 	 India 	 has 	 adopted 	 against 	 COVID-19. 	 Due	
to 	 movement 	 restrictions 	 in 	 containment 	 zones, 	 and 	 unwillingness 	 or 	 inability 	 of 	 contractors 	 and	
workers 	 to 	 carry 	 out 	 works, 	 the 	 quarterly 	 capital 	 expenditure 	 was 	 restrained 	 during 	 the 	 first 	 two	
quarters 	of 	2020-21. 	 W ith 	the 	easing 	of 	movement 	and 	health-related 	restrictions 	 in 	Q3 	of 	2020-21,	
the 	 capital 	 spending 	 was 	 pushed 	 for 	 encouraging 	 expenditure 	 in 	 sectors 	 with 	 the 	 most 	 positive 	 effect 	
on 	 the 	 economy . 	 The 	 focus 	 on 	 capital 	 spending 	 has 	 been 	 sustained 	 during 	 the 	 current 	 fiscal, 	 as 	 the	
capital 	 expenditure 	 shows 	 an 	 increasing 	 trend 	 during 	 the 	 first 	 three 	 quarters 	 of 	 2021-22 	 (Figure 1).
Figure 1: Trends in quarterly capital expenditure
 
Lockdown
Post first wave 
ramp-up
Sustained capital 
spending
40
60
80
100
120
140
160
Q1-FY2019
Q2-FY2019
Q3-FY2019
Q4-FY2019
Q1-FY2020
Q2-FY2020
Q3-FY2020
Q4-FY2020
Q1-FY2021
Q2-FY2021
Q3-FY2021
Q4-FY2021
Q1-FY2022
Q2-FY2022
Q3-FY2022 (Est)
? Thousand crore
Source:	CGA 	Monthly	 Accounts
Note:	 The	estimate	for	Q3	FY2021-22	uses	flash	figures	for	Dec	2021.
46 Economic Survey 2021-22
2.5	 Building 	 on 	 the 	 same 	 approach, 	 the 	 Union 	 Budget 	 2021-22 	 had 	 enhanced 	 the 	 budget	
outlays 	 for 	 the 	 more 	 productive 	 capital 	 expenditure. 	 The 	 Government 	 budgeted 	 for 	 a	 
34.5 	 per 	 cent 	 growth 	 in 	 capital 	 expenditure 	 over 	 2020-21 	 BE 	 – 	 with 	 emphasis 	 on 	 railways, 	 roads,	
urban 	 transport, 	 power , 	 telecom, 	 textiles 	 and 	 affordable 	 housing 	 amid 	 continued 	 focus 	 on 	 the	
National 	Infrastructure 	 Pipeline. 	 The 	National 	Infrastructure 	 Pipeline 	 covering 	 6835 	 projects 	was	
expanded 	 to 	 7400 	 projects 	 in 	 Budget 	 2021-22. 	 In 	 order 	 to 	 unlock 	 the 	 domestic 	 manufacturing	
potential 	 across 	 sectors, 	 such 	 as 	 renewable 	 ener gy , 	 heavy 	 industry , 	 agriculture, 	 automotive 	 and	
textiles, 	 Budget 	 2021-22 	 launched 	 PLI 	 schemes 	 for 	 13 	 sectors, 	 with 	 an 	 outlay 	 of 	` 1.97 	 lakh 	 crore,	
for 	 a 	 period 	 of 	 5 	 years 	 starting 	 from 	 2021-22. 	 All 	 these 	 initiatives 	 are 	 expected 	 to 	 collectively	
generate 	 employment 	 and 	 boost 	 output 	 in 	 the 	 medium 	 to 	 long 	 term 	 through 	 multiplier -effects. 	 The	
stimulus 	 measures 	 announced 	 during 	 the 	 year 	 2021-22 	 have 	 continued 	 the 	 emphasis 	 on 	 liquidity	
enhancing 	 and 	 investment 	 boosting 	 measures 	 such 	 as 	 the 	 PLI 	 Scheme, 	 credit 	 guarantee 	 schemes	
and 	 export 	 boosting 	 initiatives 	 to 	 support 	 the 	 reviving 	 economy , 	 apart 	 from 	 providing 	 free 	 food	
grains 	to 	the 	poor 	(Figure 2E ). 	 The 	details 	may 	be 	seen 	at 	Box 1 . 	In 	line 	with 	the 	agile 	approach,	
this 	 mix 	 can 	 be 	 changed 	 again 	 as 	 per 	 the 	 requirement 	 of 	 the 	 evolving 	 situation.
Figure 2: Changing mix of stimulus announcements in 2020-21 and 2021-22
2C. October 2020 (`73,000 crore) 2D. November 2020 (`2,65,080 crore)
2B. May - June 2020 (`11,85,561 crore) 2A. March 2020 (`1,92,800 crore)
Page 5


CHAPTER
02
In the backdrop of an evolving pandemic situation, Government of India’s agile policy 
response differed from the waterfall strategy of introducing front-loaded stimulus 
packages, adopted by most other countries in 2020. Immediately after the COVID-19 
outbreak, Government of India chose to first create safety-nets for the vulnerable sections 
of the society/ small businesses before going on to introduce stimulus packages to boost 
economic recovery in the second half of 2020-21. On the fiscal front, capital expenditure 
was restrained during Q1 and Q2 of 2020-21 owing to movement restrictions in 
containment zones, and unavailability of contractors/workers to carry out capital works. 
However, with the easing of movement and health-related restrictions, capital spending 
was pushed up in Q3 of 2020-21. Thus, the change in the mix of stimulus effected in 
2020-21 towards a larger share of capital spending, has continued in the current year as 
well. The stimulus measures announced so far during the year 2021-22 include liquidity 
enhancing and investment boosting measures such as the Production Linked Incentives 
scheme, credit guarantee schemes and export boosting initiatives. 
With the bouncing back of the economy in the current financial year, the revenue receipts 
of the central government during April to November 2021 have gone up by 67.2 per cent 
(YoY), as against an expected growth of 9.6 per cent in the 2021-22 Budget Estimates (over 
2020-21 Provisional Actuals). The buoyant tax collections of both direct and indirect taxes, 
along with the non-tax revenue boosted by RBI’ s surplus transfer to the Government, have 
contributed to the increase in the revenue pool. The gross tax revenue during this period 
has registered a growth of over 50 per cent in YoY terms. This performance is strong not 
only over the corresponding period of the previous year but also when compared to the 
pre-pandemic levels of 2019-20. The gross monthly GST collections have crossed the  
` 1 lakh crore mark consistently since July 2021, after quickly recovering from a dip 
in June 2021 following the second wave of COVID-19. The impact of the second wave 
of COVID-19 on GST collections was much more muted as compared to the first wave. 
The ongoing improvement in revenue performance during the current year can also be 
attributed to increased tax compliance enabled by various tax administration and policy 
reforms implemented by the Government in the past few years. 
The New Public Sector Enterprise Policy and Asset Monetisation Strategy introduced by 
the Government reaffirm its commitment towards privatization and strategic disinvestment 
Fiscal Developments 
44 Economic Survey 2021-22
INTRODUCTION
2.1	 Over	 the	 last	 two	 years,	 fiscal	 policy	 has	 rema ined	 a	 significant	 tool	 for	 addressing	 the	
economic	 fall out	 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
1
	 of	 introducing	 front-loaded	 stimulus	
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.
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  
1 14.8 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.
1
W aterfall	strategy 	as	explained	in	chapter	1	of	the	Survey
45 Fiscal Developments 
FISCAL POLICY STRATEGY IN THE AFTERMATH OF THE 
PANDEMIC OUTBREAK
2.3	 The	 agil e	 fiscal	 polic y	 response	 adopted	 by	 Government	 of	 India	 encompassed	 a	 change	
in	 mix	 of	 the	 stimulus	 mea sures	 amidst	 an	 uncertain	 evolution	 of	 the	 pandemic	 situation.	 In	 the	
initial	 phase	 of	 the	 pandem ic,	 the	 fiscal	 policy	 focused	 on	 building	 safety-nets	 for	 the	 poor	 and	
vulnerable	 sections	 of	 society	 to	 hedge	 against	 the	 worst-case	 outcomes.	 Stimulus	 measures	 such	
as	 direct	 benefit	 transfers	 to	 the	 vulnerable	 sections,	 emer gency	 credit	 to	 the	 small	 businesses,	
and	 the	 world’ s	 lar gest	 food	 subsidy	 programme	 tar geting	 80.96	 crore	 beneficiaries	 enabled	
the	 creation	 of	 safety-nets,	 by	 ensuring	 that	 the	 essentials	 are	 taken	 care	 of.	 This	 was	 followed	
by	 a	 series	 of	 stimulus	 packages	 spread	 throughout	 the	 year	 2020-21,	 driven	 by	 a	 Bayesian	
updating	 of	 information	 as	 the	 situation	 evolved.	 W ith	 the	 restoration	 of	 economic	 activities,	 the	
fiscal	 response	 focused	 on	 stimulating	 demand	 in	 the	 economy .	 During	 this	 phase	 of	 economic	
recovery ,	 the	 stimulus	 mix	 included	 investment	 boosting	 measures	 like	 Production	 Linked	
Incentives	 (PLI),	 steps	 to	 encourage	 investment	 in	 infrastructure	 sector	 and	 enhancing	 capital	
expenditure	by	the	Central	and	state	Governments	( Figure 2 A to 2 D ).		
2.4	 This 	 enhanced 	 focus 	 on 	 capital 	 expenditure 	 in 	 the 	 second 	 half 	 of 	 the 	 year 	 2020-21 	 is 	 reflective 	
of 	 the 	 responsive 	 fiscal 	 policy 	 which 	 Government 	 of 	 India 	 has 	 adopted 	 against 	 COVID-19. 	 Due	
to 	 movement 	 restrictions 	 in 	 containment 	 zones, 	 and 	 unwillingness 	 or 	 inability 	 of 	 contractors 	 and	
workers 	 to 	 carry 	 out 	 works, 	 the 	 quarterly 	 capital 	 expenditure 	 was 	 restrained 	 during 	 the 	 first 	 two	
quarters 	of 	2020-21. 	 W ith 	the 	easing 	of 	movement 	and 	health-related 	restrictions 	 in 	Q3 	of 	2020-21,	
the 	 capital 	 spending 	 was 	 pushed 	 for 	 encouraging 	 expenditure 	 in 	 sectors 	 with 	 the 	 most 	 positive 	 effect 	
on 	 the 	 economy . 	 The 	 focus 	 on 	 capital 	 spending 	 has 	 been 	 sustained 	 during 	 the 	 current 	 fiscal, 	 as 	 the	
capital 	 expenditure 	 shows 	 an 	 increasing 	 trend 	 during 	 the 	 first 	 three 	 quarters 	 of 	 2021-22 	 (Figure 1).
Figure 1: Trends in quarterly capital expenditure
 
Lockdown
Post first wave 
ramp-up
Sustained capital 
spending
40
60
80
100
120
140
160
Q1-FY2019
Q2-FY2019
Q3-FY2019
Q4-FY2019
Q1-FY2020
Q2-FY2020
Q3-FY2020
Q4-FY2020
Q1-FY2021
Q2-FY2021
Q3-FY2021
Q4-FY2021
Q1-FY2022
Q2-FY2022
Q3-FY2022 (Est)
? Thousand crore
Source:	CGA 	Monthly	 Accounts
Note:	 The	estimate	for	Q3	FY2021-22	uses	flash	figures	for	Dec	2021.
46 Economic Survey 2021-22
2.5	 Building 	 on 	 the 	 same 	 approach, 	 the 	 Union 	 Budget 	 2021-22 	 had 	 enhanced 	 the 	 budget	
outlays 	 for 	 the 	 more 	 productive 	 capital 	 expenditure. 	 The 	 Government 	 budgeted 	 for 	 a	 
34.5 	 per 	 cent 	 growth 	 in 	 capital 	 expenditure 	 over 	 2020-21 	 BE 	 – 	 with 	 emphasis 	 on 	 railways, 	 roads,	
urban 	 transport, 	 power , 	 telecom, 	 textiles 	 and 	 affordable 	 housing 	 amid 	 continued 	 focus 	 on 	 the	
National 	Infrastructure 	 Pipeline. 	 The 	National 	Infrastructure 	 Pipeline 	 covering 	 6835 	 projects 	was	
expanded 	 to 	 7400 	 projects 	 in 	 Budget 	 2021-22. 	 In 	 order 	 to 	 unlock 	 the 	 domestic 	 manufacturing	
potential 	 across 	 sectors, 	 such 	 as 	 renewable 	 ener gy , 	 heavy 	 industry , 	 agriculture, 	 automotive 	 and	
textiles, 	 Budget 	 2021-22 	 launched 	 PLI 	 schemes 	 for 	 13 	 sectors, 	 with 	 an 	 outlay 	 of 	` 1.97 	 lakh 	 crore,	
for 	 a 	 period 	 of 	 5 	 years 	 starting 	 from 	 2021-22. 	 All 	 these 	 initiatives 	 are 	 expected 	 to 	 collectively	
generate 	 employment 	 and 	 boost 	 output 	 in 	 the 	 medium 	 to 	 long 	 term 	 through 	 multiplier -effects. 	 The	
stimulus 	 measures 	 announced 	 during 	 the 	 year 	 2021-22 	 have 	 continued 	 the 	 emphasis 	 on 	 liquidity	
enhancing 	 and 	 investment 	 boosting 	 measures 	 such 	 as 	 the 	 PLI 	 Scheme, 	 credit 	 guarantee 	 schemes	
and 	 export 	 boosting 	 initiatives 	 to 	 support 	 the 	 reviving 	 economy , 	 apart 	 from 	 providing 	 free 	 food	
grains 	to 	the 	poor 	(Figure 2E ). 	 The 	details 	may 	be 	seen 	at 	Box 1 . 	In 	line 	with 	the 	agile 	approach,	
this 	 mix 	 can 	 be 	 changed 	 again 	 as 	 per 	 the 	 requirement 	 of 	 the 	 evolving 	 situation.
Figure 2: Changing mix of stimulus announcements in 2020-21 and 2021-22
2C. October 2020 (`73,000 crore) 2D. November 2020 (`2,65,080 crore)
2B. May - June 2020 (`11,85,561 crore) 2A. March 2020 (`1,92,800 crore)
47 Fiscal Developments 
 
Agriculture
2%
Food
21%
Health
4%
Investment 
boosting
17%
Export boosting
17%
Liquidity 
enhancing
39%
2E. June to December 2021 (`6,97,338 crore)
Source:	PIB
Note:	Details	of	stimulus	announcements	from	June	to	December	2021	may	be	seen	at	Box	1.
Box 1: STIMULUS ANNOUNCEMENTS DURING 2021-22
In	 order	 to	 reduce	 the	 impact 	 of	 the	 shock	 caused	 by	 the	 COVID-19	 second	 wave	 and	 support	 the	
recovering	 economy ,	 Government	 of	 India	 announced	 additional	 relief	 measures	 in	 2021-22	 which	
have	 been	 listed	 in	 the	 table	 below .	 These	 measures	 were	 tar geted	 towards	 providing	 economic	 relief	
to	 the	 vulnerab le	 people	 and	 sectors,	 strengthening	 the	 health	 system,	 and	 providing	 impetus	 to	
growth	and	employment.
Details of the measures Amount (` Crore)
June 2021 (`6.29 lakh crore)
Stimulus package for COVID-19 relief 6,28,993
Loan	Guarantee	Scheme	for	 COVID-19 	affected	sectors	 1,10,000	
Emer gency	Credit	Line	Guarantee	Scheme	(ECLGS)	 1,50,000	
Credit	Guarantee	Scheme	for	Micro	Finance	institutions	 7,500	
Scheme	for	tourist	guides/stakeholders -
Free	one	month	tourist	visa	to	5	lakh	tourists	 100	
Extension	of	 Atma	Nirbhar	Bharat	Rozgar	 Y ojana	 -	
Additional	subsidy	for	DAP 	&	P&K	fertilizers 14,775	
Free	food	grains	under	PMGKY 	(May	to	November ,	2021)	 93,869	
New	scheme	for	public	health 15,000
Release	of	climate	resilient	special	traits	varieties -