India’s FY21 and FY22 fiscal deficit was significantly higher than expectations, primarily due to a one-off move by the finance ministry to repay past arrears due to the Food Corporation of India (FCI), and include all food subsidies on the budget going forward. However, spending seems likely to ramp up significantly over the next few months even after factoring in this one-off impact. The underlying spending pace is projected to fall in FY22 despite robust capex spending – with a lower overall fiscal impulse to growth than in FY21. The budget was more positive for equities, less so for bonds given larger-than-expected supply and the slower pace of deficit normalization.