Budget 2018: Govt to borrow Rs 200 billion more in FY18, says Subhash Garg

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The government will reduce its additional borrowing to Rs 200 billion from the bond markets in the financial year 2017-18, from Rs 500 billion announced last month, Economic Affairs Secretary Subhash Garg said.

This is primarily because the Reserve Bank of India will pay a higher-than-anticipated surplus to the Centre, and the dividend target from state-owned companies will also be met, senior government sources confirmed separately to Business Standard.

While disinvestment target for the year is expected to overshoot the budgeted estimates by quite a margin, things seem to be looking up on the direct taxes front as well. There are still expectations of a shortfall in goods and service tax and spectrum sales.

“Government has reassessed additional borrowing requirements taking note of revenue receipts and expenditure pattern. The requirement of additional borrowing being reduced from Rs 50,000 crore (Rs 500 billion) as notified earlier to Rs 20,000 crore,” Garg tweeted on Wednesday morning.

When the additional borrowing of Rs 500 billion was announced in late December, analysts expected fiscal deficit as a percentage of gross domestic product to cross 3.5 per cent of GDP, as opposed to a budgeted target of 3.2 per cent.

Accounting for the first advance estimates for FY2017-18, which were released earlier this month, and all other factors being equal, an additional borrowing of Rs 200 billion could widen the fiscal deficit to Rs 5.66 trillion. As a percentage of nominal GDP of Rs 166 trillion, that comes to about 3.4 per cent.

“The RBI may manage to pay more surplus than what was earlier anticipated. And by March, we will see that the dividend target from PSUs will have been met as well,” said a senior government official.

The Finance Ministry has been seeking Rs 430 billion in dividends from RBI as opposed to Rs 306.5 billion that the central bank has already paid. The final payout could be more than what North Block has been asking for.

The combined target for the year from dividends from RBI, state-owned banks, and state-owned companies is Rs 1.42 trillion. Of which, non-financial PSUs alone will pay Rs 675 billion. That portion is now expected to be achieved, in spite of the pressure on PSUs to spend Rs 250 billion more in capital expenditure than what was envisaged earlier.

The government has breached its fiscal deficit target given in the Budget for 2017-18 in November itself and touched 112 per cent of the budget target. This is the highest deviation from the Budget Estimates (BE) for fiscal deficit in the first eight months of a financial year since 2008-09, the year of the global financial crisis.

For this year, the Centre is also staring at a tax revenue shortfall of Rs 250-300 billion in GST, and is also under pressure regarding spectrum sales. A big positive has been disinvestment, wherein the proceeds could be as high as Rs 900 billion as opposed to a target of Rs 725 billion.business-standard.com