Govt. 'pushes up' fiscal deficit

NEW DELHI NOV. 1. The Union Finance Ministry has consciously allowed the fiscal deficit to go up by a stupendous Rs. 37,547 crores within a month, between August and September this year. Consequently, the fiscal deficit, which was at a "very manageable" level of 28.3 per cent of the annual target till the end of August 2003, has shot up to 52.5 per cent by the end of September.

Sources in the Finance Ministry said the spurt in the fiscal deficit had not occurred on account of any heavy expenditure within one month. On the contrary, it had gone up because of the conscious decision to repay Rs. 32,000 crores to the National Small Savings Fund in September as part of the attempt to repay the Rs. 2,00,000 crores outstanding from the Government to the fund. An earlier instalment of Rs. 14,000 crores was paid back in March this year.

But for the Rs. 32,000 crore repayment to the NSSF, the fiscal deficit during September had gone up by about Rs. 5,000 crores. The deficit, till the end of August 2003, was at Rs. 43,467 crores, which ended up at Rs. 81,014 crores by the end of September.

The repayment to the NSSF has been possible this year because of the debt-swap scheme launched by the Centre for the States. Under this scheme, States have been permitted to retire a portion of their high-cost central debt and swap it with fresh low-cost borrowings. The target set for the debt-swap scheme this year is Rs. 61,000 crores and in the first tranche, about Rs. 32,000 crores accrued to the Central Government.

Since these are capital receipts, the Centre had the option to retain this amount and bring down its fiscal deficit correspondingly. However, a decision was taken not to retain this amount and instead use it to clear a portion of the NSSF outstanding.

The Government, however, would get some benefit out of this repayment too. The NSSF had invested the amount received from the Centre in Government of India securities and to that extent, the Centre's borrowings this year would come down.

For instance, the borrowing plan for the last five months of the current fiscal was only Rs. 25,000 crores in equal tranches of Rs. 5,000 crores. But for the investment in Government securities by the NSSF, the Centre's borrowings in these five months would have been Rs. 60,000 crores. "It is prudent fiscal management by the Government and not any overshooting of expenditure that has brought about the jump in fiscal deficit,'' Ministry sources said.

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