Farmers’ income scheme hits fiscal math

K.R. Srivats Updated - December 06, 2021 at 09:26 PM.

But fiscal consolidation glide path in next two years not to be affected by additional expenditure, says Piyush Goyal

Piyush Goyal, interim Finance Minister, addressing a press conference after presenting the Union Budget. Also seen is Subhash Chandra Garg, Secretary Economic Affairs

The Centre’s fiscal deficit may have seen some slippage in 2019-20, but the Modi government has maintained the glide path towards target of 3 per cent fiscal deficit by 2020-21, said interim Finance Minister Piyush Goyal on Friday.

Goyal attributed the fiscal slippage largely to the additional spend arising from ‘PM Kisan’, a new scheme announced today as income support for poor landowning farmers. The Centre would entirely fund the estimated ₹95,000 crore spend under ‘PM Kisan’ for 2018-19 (₹20,000 crore) and 2019-20 (₹75,000 crore).

After completing the fiscal deficit consolidation programme, the Centre will next focus on debt consolidation, Goyal said in his interim Budget speech on Friday.

India’s debt-to-GDP ratio was 46.5 per cent in 2017-18. The FRBM Act prescribes that the debt-to-GDP ratio of the Centre should be brought down to 40 per cent by 2024-25.

As against the Budget estimate of fiscal deficit of 3.3 per cent of GDP for 2018-19, the revised estimate has pegged the fiscal deficit at 3.4 per cent. Even for 2019-20, the Centre has pegged the Budget estimate for fiscal deficit at 3.4 per cent of the GDP.

This translates into increased fiscal deficit of about ₹10,000 crore, which is largely going to be met from increased net borrowings of ₹32,500 crore for 2018-19.

This net borrowing of about ₹32,500 crore would include Treasury bills issuance of about ₹8,000 crore, said Subash Garg, Economic Affairs Secretary, later .

 

For 2019-20, the interim Budget has pegged the fiscal deficit target at 3.4 per cent of GDP — an increase of ₹80,000 crore (12.8 per cent jump) on a year-on-year basis. Of this as much as ₹75,000 crore is earmarked for the ‘PM Kisan’ scheme.

“We would have maintained fiscal deficit at 3.3 per cent for year 2018-19 and taken further steps to consolidate fiscal deficit in year 2019-20. However, considering the need for income support to farmers we have provided ₹20,000 crore in 2018-19 RE and ₹75,000 crore in 2019-20 BE. If we exclude this, the fiscal deficit would have been less than 3.3 per cent for 2018-19 and less than 3.1 per cent for year 2019-20,” Goyal said in his Budget speech.

RBI dividend

The Centre expects the RBI to fork out an interim dividend of about ₹28,000 crore.

This has been budgeted for in the revised estimated for 2018-19, a top Finance Ministry official said. The RBI Board has to formally meet on this issue and declare the interim dividend.

Disinvestment

For 2018-19, the Centre has pegged the disinvestment target at ₹80,000 crore in the revised estimates, which is the same as the Budget estimate. For 2019-20, the disinvestments receipt target has been pegged at ₹90,000 crore.

Disinvestment Secretary Atanu Chakraborty expressed confidence that disinvestment target of ₹80,000 crore would be met for 2018-19 although the total mop till end January was only ₹35,533 crore.

Typically 55 per cent of the disinvestment target gets achieved in the second half of financial year and that will be the case this time too, he said.

Published on February 1, 2019 15:29