Explained: Why off-Budget borrowings fall a statistical illusion

It would seem at first glance that Finance Minister Nirmala Sitharaman in her Budget has drastically reduced off-Budget financing for government spending — by almost 13 per cent — over what was given in the Revised Estimates (RE) of 2018-19.
 
Internal and extra budgetary resources (IEBR) have been pegged at Rs 5.37 trillion for FY20 in the Budget Estimates (BE) against Rs 6.13 trillion in the RE for FY19. However, the Budget document itself says the numbers should be interpreted with caution.
 
In 2018-19, Rs 97,000 crore was provided to Food Corporation of India through loans from the National Social Security Fund (NSSF).
 

“For the sake of comparison with BE 2019-20, an amount of Rs 97,000 crore of NSSF loans to FCI should be excluded in RE 2018-19,” said a footnote given in the final Budget documents for 2019-20.
 
If Rs 97,000 crore is taken out, the IBER of 2018-19 in the RE come to just Rs 5.16 trillion (Rs 6.13 trillion minus Rs 97,000 crore).

Compared to that, the IBER given for FY20 at Rs 5.37 trillion were 4.3 per cent higher.
 
The NSSF loan to FCI also becomes clear if one looks at the subsidy of the government.
 
Aditi Nayar, principal economist at ICRA Ratings, said the subsidy outlay for the Department of Food and Public Distribution stood at Rs 1 trillion in FY19, which is 60.2 per cent of the RE of the year.
 
Time and again, the government has drawn flak for allegedly hiding its fiscal deficit by resorting to off-Budget borrowings.
 
In its recent report, the Controller and Auditor General (CAG) said: “Resorting to off-budget financing for revenues and capital spending seems to be an easy way out because while such financial jugglery (has) fiscal implications (and) they do not form part of the calculation of fiscal indicators like fiscal deficit.”
 
Gross budgetary support, on the other hand, rose by around 7 per cent at Rs 3.38 trillion in the BE of FY20 over Rs 3.17 trillion in FY19 (RE).
 
A note by ICRA says budgetary support to the Railways increased by 24.6 per cent to Rs 64,587 crore in the BE of FY20, while that for the National Highways Authority of India (NHAI) was marginally lowered to Rs 36,691 crore over the RE of FY19.
 
The NHAI is expected to raise equity by monetising more assets through toll-operate-transfer and Infrastructure Investment Trust routes (by transferring mature assets to special purpose vehicles), says the note.
 
Therefore, monetising mature road assets in a timely manner is important to get money to support the Bharatmala programme. If it fails, the shortfall has to be met through additional borrowings, increasing the debt of the NHAI further, the note says.