Had all off-budget borrowings — where the repayment obligation is essentially on the sovereign — and various unmet payment obligations been considered, the Centre’s fiscal deficit for 2018-19 would have amounted to a discomfiting 6.1% of the gross domestic product (GDP) instead of the 3.4% reported. This would have been higher than such deficit of 5.85% for 2017-18, as estimated by the Comptroller and Auditor General (CAG).
So, as many experts have pointed out, there is actually upward spiral in the general government deficit, while the official line is that the prescribed glide path is being adhered to. Rathin Roy, member of the Economic Advisory Council to the Prime Minister, recently said the country might be staring at a “silent fiscal crisis” and called for a white paper on the medium-term fiscal targets.
Pertinently, the Centre could meet the revised estimate (RE) for its fiscal deficit for 2018-19 only after a
savage reduction in expenditure by Rs 1.46 lakh crore, or 5.9% from the RE level, as tax receipts fell terribly short of the respective RE.
To be sure, the Centre has redrawn the glide path to bring down the deficit to 3% repeatedly, the latest deadline to reach the target is 2020-21. The states performed relatively better on the fiscal front last fiscal — their combined deficit for the year is seen to be around 2.6%.
To compute the Centre’s actual fiscal deficit for 2018-19, FE factored in not just the extra-budget resources shown in the Budget papers but also the funds raised by other state-run undertakings which also will presumably rely on the sovereign to repay the debt.
The Centre’s off-budget borrowings include several loans, which are to be fully serviced by the Centre and some borrowings such as those by NHAI, PFC and IRFC, which ultimately are government liabilities. The CAG used borrowings by these entities to estimate the fiscal deficit for 2017-18.
Off-budget spending by the Centre in 2018-19 include Rs 1.06 lakh crore recapitalisation of public sector banks via bonds, Rs 97,000 crore borrowings by PFC for lending largely to the government-sector power projects, Rs 61,000 crore by NHAI for highways and Rs 52,297 crore by IRFC for railway projects.
Also, the Food Corporation of India took Rs 70,000 crore loan from NSSF to meet its food subsidy obligations, Rs 33,000 crore banking arrangement for fertiliser firms for selling fertiliser at discounted rates to farmers. Besides, there were Rs 25,000 crore unpaid dues to oil PSUs. Additionally, Nabard raised Rs 30,000 crore to finance the government’s rural affordable housing, sanitation and irrigation projects; Hudco/NHB provided Rs 20,000 crore finance for affordable urban housing while Rs 19,331 crore was raised via REC/PFC for the Centre’s rural electrification schemes.
In a post-Budget interview to FE, then finance secretary SC Garg had said the government would progressively trim its extra-budgetary resource mop-ups, seeking to assuage concerns over the Centre’s increasing reliance on such loans in recent years to fund expenditure that effectively masked its actual fiscal deficit.
Expressing concern over the Centre’s increasing reliance on off-budget borrowings, the CAG said last year that off-budget capex and revenue expenditures understate fiscal indicators. “The government may consider putting in place a policy framework for off-budget financing, which, amongst others, should include disclosure to Parliament,” the national auditor had said.