Budget 2018: FM Arun Jaitley deviates sharply from fiscal roadmap

Govt revises fiscal deficit estimate to 3.3% of GDP for 2018-19

Finance Minister Arun Jaitley deviated sharply from the established fiscal roadmap and set a revised fiscal deficit target of 3.5 per cent of gross domestic product for 2017-18, as compared to 3.2 per cent announced last year. Presenting Budget 2018 in Parliament, he set a fiscal deficit target of 3.3 per cent of GDP for the upcoming year.

Jaitley admitted that this was because of shortfall in goods and service tax and non-tax revenue projections, and higher expenditure. Even higher disinvestment proceeds of Rs 1 trillion, compared with budgeted estimates of Rs 725 billion, could not prevent a breach of Rs 500 billion in the absolute fiscal deficit numbers.

“Fiscal deficit this year will be Rs 596 billion,”Jaitley said in Parliament. The target set in the 2017-18 was Rs 546 billion, or 3.2 per cent of GDP. The revised estimate of 3.5 per cent of GDP comes in spite of lower additional borrowing, which was reduced to Rs 200 billion from Rs 500 billion, above a target of Rs 5.8 trillion.

For 2018-19 Jaitley set a disinvestment target of Rs 800 billion, inspite of expecting to achieve Rs 1 trillion in 2017-18. He said that the government has planned to list some 16 state-owned companies and privatize some 24 CPSE’s including Air India.

He said that three general insurance companies which had not yet been listed, namely National Insurance, Oriental Insurance and United India Insurance, will be merged into one company and then listed.

He also said that the Department of Investment and Public Asset Management will launch a new debt-exchange traded fund and issue further tranches of existing equity ETFs.

As reported in Business Standard earlier, while Air India will be the marquee sale, expected to be completed by October 2018, the centre may sell Pawan Hans as well, among other loss-making PSUs.

The centre launched its second PSU ETF, the Bharat 22 ETF in November and garnered Rs 145 billion. An official said that there is still a lot of interest amongst investors, and a second tranche is certain to be launched early next fiscal. There could be further tranches of its first PSU ETF as well.

The pipeline of pending IPOs include defence companies like Hindustan Aeronautics Ltd, Garden Reach Shipbuilders, Bharat Dynamics and Mazagaon Dockyards, railway companies like IRCON, RITES, IRCTC and IRFC, and three general insurance companies.