Govt's finances won't be overstretched by Covid vax drive, relief measures: SBI Research .
The government finances are not likely to be stretched by the announcements recently done for the states ,like free food grains for the poor section of people with free covid vaccination drives etc. which would impact 28,512 crores according to the State Bank of India research
Revenue is largely coming from fuel consumption. It was expected to be higher than the usual budget estimates.
Soumya Kanti Ghosh , Chief economic advisor of SBI said, Risks to expected revenue collection includes the third wave that would impact the consumption and change in fuel tax structure.
But the good news was that the impact would create additional fiscal space and fuel prices acting as buffers . So the price of fuel may not decline .
The Union government had said that it would cover 75 percent the cost of the 1.62 million doses for the vaccination of the Indian adult population. Assuming the cost one doze be 400 the vaccination drive would cost the government 48,851 crore of which the government has already budgeted 35000 crores.
With extension of the Pradhan Mantri Gareeb Kalyan Anna Yojna which is till November would put an additional cost of 91000 crore on the government finances .
As per GST collection for the month of April and May estimate suggests that the revenue for the next financial year would go upto 8.27 lakh crore against the budgeted estimate of 7.67 lakh crores.
That would imply that the government will not have to borrow money as compensation for the short falls.
SBI Research said that the consumption of petrol and diesel accounting to pandemic had induced disruption, which would see excise duty revenue to touch to 4.11lakh crore this year,the report said .
While we should not rule out the disruption to government finances in subsequent months as economic activity only picks up modestly we should believe the space for monetary accommodation and over and only a proactive fiscal policy could rekindle animal spirits and growth , said by the research report by SBI.