Divestment mop-up, tax bonanza from ‘black money’ scheme will bail out FinMin

The muted response to the telecom spectrum auctions has not dampened the Finance Ministry’s confidence about meeting the fiscal deficit target for 2016-17 on the strength of the proceeds from the Income Disclosure Scheme.

The Centre has set a fiscal deficit target of ₹5,33,904 crore, or 3.5 per cent of GDP, in 2016-17.

The spectrum auctions, which closed on Thursday, yielded only ₹65,789 crore. Of this, the government will receive about ₹32,000 crore this fiscal, which represents a shortfall of about ₹23,000 crore on its target of ₹56,500 crore from the auction.

“This is 43 per cent short of the ₹56,000 crore estimated in the Union Budget for this fiscal from the auctions (excluding licence and spectrum usage charges),” according to a Crisil research report.

However, the Finance Ministry is unfazed. “We were expecting the possibility of a windfall from the spectrum auctions, but it was not a part of our internal calculations,” said an official. The expected proceeds were not factored in while working out the borrowing programme for the second half of the fiscal, the official added.

The Ministry also received an unexpected boost from tax collections from the Income Disclosure Scheme.

“Proceeds from the scheme were not budgeted. We will get as much as ₹16,000 crore as tax from this,” said another senior government official.

Further, proceeds from disinvestment are also more than robust; the Centre has raised close to ₹20,000 crore from the sale of its minority stakes and from share buybacks by public sector units.

Officials also ruled out the need for any significant expenditure cuts, and noted that the shortfall would be easily met through other revenue sources. However, by April-August 2016, its fiscal deficit had touched 76.4 per cent of the full-year target.

Analysts believe the windfall from the Income Declaration Scheme will allow the Centre to set right its fiscal maths.

“If the disinvestment targets are met, and if tax collections continue as they have, there will be no problem in meeting the fiscal deficit target,” said DK Pant, chief economist, India Ratings.