Union Budget — Cost of transparency: Rs 3.7 lakh crore

If the Centre’s fiscal deficit for 2020-21 has overshot its Budget estimate (BE) of Rs 7,96,337 crore by over 2.3 occasions, a big a part of that’s attributable to 2 gadgets — meals and fertiliser subsidy — and their correct accounting.
The meals subsidy for this fiscal was budgeted at Rs 1,15,569.68 crore, which has now been pegged at an enormous Rs 4,22,618.14 crore within the revised estimate (RE). Likewise, the RE of the fertiliser subsidy for 2020-21, at Rs 133,947.30 crore, is far greater than the BE of Rs 71,309 crore.
The mixed overshooting of the meals and fertiliser subsidy, at Rs 3,69,687 crore, works out to greater than 35 per cent of the corresponding enhance within the Centre’s fiscal deficit for 2020-21 (from Rs 7,96,337 crore in BE to Rs 18,48,655 crore in RE). Or to place it in a different way, had the 2 subsidy payments not exceeded their BE, the Centre’s fiscal deficit would have been solely 7.6 per cent of GDP, as towards the revised variety of 9.5 per cent offered by the Finance Minister Nirmala Sitharaman on Monday (the BE was a mere 3.5 per cent).

All that is additionally a results of the Narendra Modi authorities deciding to offer totally for its meals and fertiliser subsidy outgo with none resort to fiscal subterfuge. Such sleight of hand, in current occasions, took the type of compelled off-budget borrowings by the Food Corporation of India (FCI) or funds to fertiliser companies being carried over to the next yr.

FCI, 2019-20, needed to undertake further borrowings of Rs 1,10,000 crore from the National Small Savings Fund (NSSF), which was greater than the corresponding Rs 1,08,688.35 crore meals subsidy determine within the Centre’s books. In 2020-21, too, the BE for the meals subsidy (Rs 1,15,569.68 crore) was decrease than FCI’s projected borrowings from NSSF (Rs 1,36,600 crore). But these borrowing are actually estimated at solely Rs 84,636 crore, with repayments to the NSSF means greater at Rs 2,20,524 crore. For the approaching fiscal, FCI is just not budgeted to take any loans from NSSF (these entice 7.4 per cent curiosity), with the Centre bearing your complete meals subsidy burden of Rs 2,42,836 crore on its books. The identical goes for the fertiliser subsidy, the place corporations have been owed round Rs 48,000 crore of dues in the beginning of 2020-21. The BE provision of Rs 71,309 crore wouldn’t have met the subsidy requirement, which, for the present fiscal alone, was positioned at Rs 80,000-85,000 crore – primarily based on the anticipated consumption of particular person fertilisers, value of imported vitamins and inputs/intermediates, rupee-dollar change price, and so forth. But with the RE of Rs 1,33,947.30 crore, all outstandings to fertiliser companies would stand cleared.
This complete transparency-cum-cleanup train has come at a price. That further tab, of practically Rs 3.7 lakh crore or 1.9 per cent of GDP, should be picked up by the taxpayer.