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LATEST NEWS UPDATES | CAG demonstrates how govt relies on off-budget resources to fund deficit - Dinesh Narayanan

CAG demonstrates how govt relies on off-budget resources to fund deficit - Dinesh Narayanan

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published Published on Jul 24, 2019   modified Modified on Jul 24, 2019
-The Economic Times

India’s deficit numbers have come under lens as the govt is increasingly depending on off-budget borrowings.

The Comptroller and Auditor General (CAG) has said that the central government’s key deficit figures may be considerably higher than those stated in the union budget.

In a presentation to the 15th Finance Commission (FFC) on July 8, three days after the July 5 budget, CAG has asked whether the extra-budgetary resources accounted for in the budget reflect the correct picture. To make its point, the auditor re-calculated the fiscal deficit of 2017-18 to show that it actually works out to 5.85%. The government had reported a fiscal deficit of 3.46% that year.

India’s deficit numbers have come under sharp scrutiny as the government has been increasingly depending on off-budget borrowings to fund capital expenditure and even revenue expenditure such as food and fertiliser subsidy arrears. However, the reporting is such that the actual extent of the borrowing is unclear even to budget experts.

A July 4 government press release after the Economic Survey was tabled in Parliament said the general government (centre and states) has been on the path of fiscal consolidation and fiscal discipline. The combined fiscal deficit of the centre and states had declined from 6.4% in 2017-18 to 5.8% in 2018-19, it said and added that public finances were well aligned to the glide path to achieving fiscal deficit of 3% of GDP by 2020-21.

However, that may be tough going by the CAG’s methodology of calculating the deficit. The auditor has also found that the revenue deficit in 2017-18 was actually 3.48% of GDP and not 2.59% as reported.

ET has reviewed a copy of the CAG’s presentation. Questionnaires sent to the finance ministry, FFC and CAG on July 15 remain unanswered until now.

In a statement describing the meeting released on July 8, the FC said the issue of “fiscal transparency in the fiscal reporting of the Union and state governments was discussed especially in the light of increasing trend of off-budget and extra-budgetary resource raising by the governments”. The release, however, had not given specific numbers. The meeting discussed, among other things, “under-reporting of deficit, debt; potential risks of absence of revenue deficit as a target’’, the release said.

CAG estimated off-budget borrowings for revenue expenditure at 0.96% of GDP, and off-budget borrowings for capital expenditure at 1.43% of GDP. Adding these to the budget’s numbers causes a sharp rise in deficit figures for fiscal year 2018.

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The Economic Times, 24 July, 2019, https://economictimes.indiatimes.com/news/economy/indicators/cag-demonstrates-how-govt-relies-on-off-budget-resources-to-fund-deficit/articleshow/70360281.cms?from=m


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