Modi government's spectrum math goes awry

The govt will receive Rs 65,789.12 cr from spectrum sale over a period, but will get just Rs 32,000 cr in the current financial year

The government will have to raise Rs 32,000 crore more to meet the fiscal deficit target of 3.5 per cent of gross domestic product (GDP) for 2016-17, as it will get just half of the Rs 64,000-crore it had budgeted for 2016-17 from spectrum sale. This prompted economists to say the fiscal deficit target for the current financial year was too stiff.

Part of the shortfall from spectrum receipts could be filled by about Rs 15,000 crore that the government will get from a recent black money disclosure scheme. The other way out is to cut expenditure. But the government can do that only with regard to wasteful expenditure and not capital outlays because the economy needs a boost.

The government will receive Rs 65,789.12 crore from spectrum sale over a period, but will get just Rs 32,000 crore in the current financial year. Non-tax revenue, under which spectrum sale is categorised, was just Rs 1.05 lakh crore in the first five months of 2016-17, constituting 32.5 per cent of Rs 3.23 lakh crore of the budgeted amount. This is a little less than half of 61.2 per cent seen in the corresponding period of 2015-16. In the first five months, the Centre's fiscal deficit shot up to 76.4 per cent of Rs 5.34 lakh crore budgeted for 2016-17.

The fiscal deficit was at 66.5 per cent of the Budget Estimate (BE) in the first five months of 2015-16. The government will get almost Rs 15,000 crore as taxes, penalty and Krishi Kalyan Cess from more than Rs 65,000 crore worth of declarations under the four-month black money disclosure window that ended on September 30. The numbers may be slightly revised upwards.

Assuming that black money disclosures were revised upwards to Rs 75,000 crore as many reports have pegged, the government would get Rs 33,750 crore of taxes from black money declarants.

Of this, only Rs 16,875 crore would come to the government kitty this financial year, due to staggered payments allowed under the scheme. This would still leave Rs 15,000 crore of shortfall, due to less proceeds from spectrum, to be filled.

The government has not been able to raise adequate money from other sources. Of the budgeted Rs 56,500 crore via disinvestment and strategic sale, only Rs 21,000 crore has some so far.

The government has framed plans for strategic disinvestment and is confident that it would meet the target set in the Budget. However, economists say the fiscal deficit target is too ambitious for the current financial year. "We have long argued that the fiscal consolidation plan for 2016-17 was too ambitious in light of the fiscal arithmetic, and too reliant on one-off revenue streams. The shortfall in the telecoms auctions is a case in point," says Firat Unlu, lead analyst (India), the Economist Intelligence Unit.