Family silver to finance deficit for 2 more years

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Subhash Narayan, Bijay Shankar Patel: New Delhi, Jan 16 2012, 01:19 IST

Hardpressed for funds, the government plans to continue using disinvestment proceeds to finance its deficit for two more financial years till March 2014. As per the policy decision taken in 2009, the finance ministry can use sell-off proceeds only till March this year for making capital investments in social sector schemes. At that time, the government had decided to use disinvestment proceeds for its spending to spur the economy facing the threat of a slowdown.

An official told FE that the finance ministry would soon seek a Cabinet nod. “This could be a big stimulus for the economy which is again looking at state support to spur investment,” the official said.

In November 2009, the government decided that disinvestment proceeds during April 2009 to March 2012 would be available in full for meeting the capital requirements of chosen social sector programmes. Until then, money raised from the sale of minority government shareholdings in profitable central public sector enterprises was channelled to the national investment fund which was maintained outside the consolidated fund of India. The interest income from the fund was used to finance social sector schemes and meet capital requirements of profitable PSUs and those which could be revived. However, in 2009, the government decided to use the proceeds for social sector programmes for three years, in order to guard against the impact of a global slowdown and domestic drought.

For the current fiscal, the government has targeted a fiscal deficit of 4.6% of the GDP. However, on account of higher subsidy

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