Budget 2018: Govt shuns tall FY19 targets despite additional RBI transfer

FY18 collections lower despite additional RBI transfer

Having set an ambitious target in 2017-18, the government seems to have turned realistic on garnering non-tax revenues for 2018-19. On the revenue side, a slippage in projected non-tax revenues collections was the major factor for the government exceeding by 0.3 percentage points the fiscal deficit target set under the fiscal consolidation road map for 2018-19.

The 13.5 per cent shortfall in non-tax revenue collections (over the Budget Estimates) has occurred in FY18 despite the fact that the Reserve Bank of India (RBI) transferred an additional Rs 100 billion to the government. In all, RBI has transferred surpluses of Rs 406.59 billion (Rs 306.59 had been transferred earlier), which was, however, lower than the Rs 600 billion projected in the Budget Estimates (BE).  

As a result, the government projected a modest rise of a 3.8 per cent (Rs 2.45 trillion) in non tax revenues for 2018-19 even on the lower base of RE of 2017-18. If the BE of 2017-18 is taken into account the revenues will be lower by 15.1 per cent for 2018-19. 

The government projected Rs 2.9 trillion to come from non-tax revenues for the current financial year, but is now expected to get only Rs 2.3 trillion. Had the government met its non-tax revenue target, the fiscal deficit would have been contained at the targeted 3.2 per cent of GDP or even lower. 

The transfer of surplus from RBI, dividends from public sector banks and financial institutions would give the exchequer just Rs 548.2 billion in FY19, only Rs 21 billion higher than what it is likely to get in in the current financial year. This means that the government does not expect much from struggling banks despite a Rs 800 billion recapitalisation programme.
 

Public sector units are projected to give lower dividend to the government at Rs 524.9 billion next financial year against what was expected in FY18. 

The Budget gives a combined figure for RBI, public sector banks and financial institutions dividend to the government. That was pegged at Rs 749 billion in BE but the government received only Rs 516.24 billion. 
 

The government had also asked public sector enterprises to pay more dividend to it, but they rather paid Rs 548 billion, lower than Rs 675.29 pegged in the 2017-18 Budget Estimate. 

Telecom spectrum sales did not deliver much either.

Mind the gaps

• Rs 406.59 billion surpluses transferred by the RBI in total lower than Rs 600 billion projected in Budget Estimates
• Rs 2.3 trillion is the amount the government will get from non-tax revenues against a targeted Rs 2.9 trillion
• Rs 548.2 billion is the amount the transfer of surplus from the RBI, dividends from public sector banks and financial institutions the exchequer would get in FY19
• Rs 524.9 billion dividend projected to come from public sector units in FY19
• Rs 516.24 billion dividend received from the RBI, public sector banks and financial institutions dividend in FY18. It was pegged at Rs 749 billion in Budget Estimates

Source: Budget 2018-19