CNBC-TV18 reported that tax collections as of September stand at over 55 percent of full year. In past years, by September tax collection stood at barely 40 percent. So, will the higher tax collections affect the second half borrowing calendar?
Let us go through the budget math: A CNBC-TV18 poll showed that government's tax revenues this year will exceed the budget estimate by Rs 1.6-2 trillion. Now economists are however assuming that the divestment target may not be fully met - instead of Rs 1.75 trillion maybe only Rs 1 trillion will be met.
To compensate, the Reserve Bank of India (RBI) dividend this year is nearly Rs 0.5 trillion more than what the budget assumed. So, total excess counting tax plus the RBI dividend but minus divestment – the excess comes to about Rs 1.60-1.70 trillion.
Expenses are higher largely because there is higher fertilizer subsidy, free food under Garib Kalyan Anna Yojana and vaccines may further push up government expenditure by Rs 0.9-1 trillion.
Net-net government’s excess revenue over excess expenditure may still give the government a surplus of about Rs 60,000-70,000 crore.
Also Read: Ministry of Finance approves capital expenditure projects of over Rs 2,900 crore in 8 states
Now the government's budgeted borrowing in the second half is Rs 4.8 trillion; it cancelled 30,000 crore of auctions in the first half; also goods and services tax (GST) compensation of Rs 85,000 crore may has to be borrowed. Adding all this means government may have to borrow Rs 5.95 trillion.
From this Rs 5.95 trillion if we subtract the excess Rs 60,000 crore, the government may have due to good tax collections; the second half borrowing works to Rs 5.3 trillion.
A CNBC-TV8 poll of economists was divided. One half said the government will announce a borrowing between Rs 5.3 trillion and Rs 5.6 trillion on Monday including the GST compensation. the remaining 50 percent said the government will announce a borrowing of only Rs 5 trillion.
The first group thinks government can announce a larger programme and then scale it down after December. B Prasanna Head, Global Markets Group ICICI Bank and Aurodeep Nandi, India Economist and Vice President at Nomura India shared their views.
“We have reduced our fiscal deficit expectation for the year from 6.8 percent to 6.2 percent. We are looking at a fiscal saving of around 0.4 percent of gross domestic product (GDP). And in tax we are expecting roughly 1 percent of GDP more than what the government is anticipating. So, we are looking at around Rs 2 trillion,” said Nandi.
B Prasanna believes that the government would possibly go with the same kind of a fiscal deficit number of Rs 15 lakh crore.
“I am going with Rs 5.5 lakh crore which includes the Rs 4.8 lakh crore which is the scheduled second half borrowing and the GST borrowing that they have to do to the extent of Rs 80,000-85,000 crore which is still not covered in the first half,” he said.
For the entire discussion, watch the accompanying video.