New Delhi: India will not meet its Rs 2.1 lakh crore disinvestment target in the current fiscal, but has no plans to further increase its market borrowing or go in for deficit monetisation, according to Tarun Bajaj, secretary of the Department of Economic Affairs.
The government had set this ambitious disinvestment target, banking on majority stake sales in firms like Bharat Petroleum and Air India, and listing of the country’s largest life insurer, Life Insurance Corporation of India.
However, the Covid-19 pandemic has led to delays in the stake sale process. So far, this fiscal, the government has garnered less than Rs 20,000 crore in disinvestment receipts from different routes.
In a virtual press briefing Wednesday, Bajaj announced the borrowing calendar for the second half of the fiscal year, and said: “Obviously Rs 2.1 lakh crore will not come, and we have anticipated a lower amount. Taking that into account, we have worked out our borrowing limit.”
The government retained its Rs 12 lakh crore borrowing limit for the full year, of which Rs 4.34 lakh crore will be borrowed in the second half of the fiscal. The government had initially set a target of borrowing Rs 7.8 lakh crore, but raised the limit further to Rs 12 lakh crore in May after the Covid-19 pandemic and the resulting lockdown led to a sharp fall in revenues.
Bajaj further said the borrowing limit takes into account both the potential fall in revenues as well as an increase in expenditure.
No monetising deficit
Bajaj also effectively ruled out deficit monetisation in response to a question.
“I have come out with my cards open. We need Rs 12 lakh crore and we have come out with a borrowing plan for the same amount,” the IAS officer said.
Monetising the fiscal deficit means the central bank (in this case the Reserve Bank of India) purchases government debt directly, rather than the government borrowing from the markets by selling bonds.
Fiscal deficit set to go up to Rs 14 lakh crore
The pressure on government finances is evident. Data released from the Controller General of Accounts Wednesday showed that India’s fiscal deficit in the first five months of 2020-21 stood at Rs 8.7 lakh crore.
Tax revenues in the April-August period were at only 17.4 per cent of the full-year budget estimate of Rs 2.84 lakh crore. Non-tax revenues were at Rs 86,147 crore, just 22.4 per cent of the full-year budgeted amount of Rs 3.85 lakh crore.
Expenditure, on the other hand, was at 41 per cent of the full-year estimate.
Aditi Nayar, principal economist at ICRA Ltd, said the government’s tax and non-tax revenues and disinvestment proceeds will together fall short by Rs 6 lakh crore. This will, in turn, increase the fiscal deficit to Rs 14 lakh crore, Nayar said in a note dated 30 September.
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