Responding to an ET story (“How Government Relies on Off-budget Resources to Fund Deficit,” July 25), the finance ministry said on the matter of fiscal deficit for 2017-18 and as per the FRBM Act, 2003, “definition has been worked out in budget documents and is 3.5% of GDP’’. The ministry said legal reference for all definitions of fiscal performance and fiscal deficit disclosed in the budget documents is as per that definition. 

ET’s story was based on a presentation made by the Comptroller and Auditor General (CAG) to the 15th Finance Commission (FFC) on July 8. CAG’s presentation had asked whether the government’s method of calculating extra-budgetary resources (EBR) in the budget reflected the correct picture of its finances and, by extension, the fiscal deficit. As per the auditor, fiscal deficit for FY18 worked out to 5.85% of GDP. 

FRBM Act acknowledges fiscal legitimacy of EBR and provides a framework for treatment of the same. It includes EBR in the definition of debt but not of the fiscal deficit. Thus, there is no scope of subjective interpretation of fiscal deficit other than as provided for in the Act,’’ the finance ministry said in an email to ET. 

The ministry said borrowing by PSEs (public sector enterprises) for their capital expenditure that is repaid from their own revenues can’t be considered EBR as they are not serviced by government budget. 

It also said recapitalisation of PSBs with its accompanied netting represents the completeness of the transaction as infused equity is immediately invested in government securities and is included in the demand of the concerned department of the government and is, therefore, not an off-budget transaction. And that issued securities get included in the liabilities of the government. 

“Therefore, GoI’s Budget Documents capture the entire Central Government debt including EBR issuances, all the Central Government disbursements and the fiscal deficit figure accurately,’’ the finance ministry said. 

Source : Financial Express