FY18 fiscal deficit to be below revised target as govt gets RBI, FCI boost

RBI has transferred Rs 100 bn more in surplus, and FCI has returned Rs 500 bn to the central coffers

The Reserve Bank of India (RBI) and the Food Corporation of India (FCI) came to the aid of the government in bringing down its fiscal deficit for 2017-18, slightly below the Revised Estimates (RE) of Rs 5.95 trillion. The deficit clawed back from a Rs 1.2-trillion overshoot at the end of February. 

This was achieved primarily because the RBI transferred an additional Rs 100 billion in surplus to the exchequer and the FCI returned about Rs 500 billion, it was allocated, to the finance ministry.

The fiscal deficit for April-February 2017-18 was Rs 7.16 trillion, 120 per cent of the RE for the full fiscal year, the highest overshoot for the 11-month period in any recent fiscal year.

Finance Secretary Hasmukh Adhia and Economic Affairs Secretary Subhash Garg have announced that the revised fiscal deficit target for 2017-18 has been met, though no official numbers for March other than those for direct tax, and some disinvestment details, have been made public so far.

“We had given an advance to FCI of about Rs 450-500 billion. That was being classified as capital expenditure. They returned the amount in March. So you will see that capital expenditure has gone down by that much when the data is released,” said a senior official. The April-March fiscal deficit numbers will be released on May 31, along with the January-March quarter gross domestic product data.

“The fiscal deficit we have achieved is less than the revised number of Rs 5.95 trillion and there is a primary surplus. On March 27, the Centre received an additional Rs 100 billion from the RBI,” said the official, adding that nearly one-fourth of the Centre’s projected revenues were received in March.

The RBI had transferred Rs 306 billion as surplus to the Centre for July-June 2016-17. The Centre had been asking for at least Rs 130-billion additional surplus, which the RBI was supposed to have kept aside for provisioning requirements.

Provisional figures for direct tax collections, net of refunds, stood at Rs 9.95 trillion. 

These collections are 17.1 per cent higher than the previous fiscal year’s figures of 101.5 per cent of the Budget Estimates (Rs 9.8 trillion), and 99 per cent of the RE (Rs 10.05 trillion). “The number is expected to cross Rs 10 trillion over the next few days, when we account for the taxes paid on March 31,” Adhia had said last week. The goods and services tax (GST) data available so far is only till February.

For the year, disinvestment proceeds have slightly overshot the RE of Rs 1 trillion, even as the RE for dividends from public sector enterprises and banks have been cut substantially. In March, there were two initial public offerings of defence PSU stocks – Bharat Dynamics and Hindustan Aeronautics – and two instances of share buybacks by Bharat Electronics and MOIL [formerly Manganese Ore (India)].