The government’s off-budget borrowings, also known as Extra Budgetary Resources (EBRs), are expected to increase more than 14 times to Rs 1.45 lakh crore by the end of fiscal 2019-20, as it looks to spend more on social welfare by routing expenditure outside the purview of the budget to project better fiscal discipline, a close look at budget documents shows.
EBRs are borrowings by the public sector undertakings (PSUs) on behalf of the government and are used to fund flagship schemes of the Centre.
As the borrowings are done by the PSUs and not the government directly, the quantum is not included by the government in the fiscal deficit calculation. However, the interest and the principal are fully serviced by the government from the budget in the form of allocations to ministries, over a period of time.
From FY20 onwards, these off-budget bonds— issued by PSUs on behalf of the central government— were included in its total debt, and are thus part of the debt liabilities.
“A mechanism for budgeting for EBRs has been operationalised” and “Extra Budgetary Resources have been included from BE 2019-20, as it falls within the purview of the definition of debt as the repayment of principal and interest are through the Annual Financial Statement,” the finance ministry said in the Budget dossier.
In recent years, the central government managed to rein in the budget deficit, thanks to higher fuel taxes and subsidy cuts. But tax collections have not kept pace with government projections, posing a dilemma for fiscal discipline.
In the budget presented on July 5, the government cut the fiscal deficit target to 3.3 percent of GDP for the year ending March 31, 2020, from the upwardly revised target of 3.4 percent.
Stacked against this backdrop, the off-budget borrowings are expected to be vital in the government’s increased spending on social welfare schemes.
Take a look at the numbers. The actuals of FY19 reveal fresh EBRs worth Rs 64,000 crore were raised and deployed to fund the Pradhan Mantri Awas Yojana (urban and rural), a housing scheme, with a spend of almost Rs 31,000 crore; the Deen Dayal Upadhyaya Gram Jyoti Yojana, and the Saubhagya scheme, both of which are aimed at increasing electricity access, with an expenditure of almost Rs 14,000 crore; the Swachh Bharat Mission, the sanitation drive (rural), with an outlay of over Rs 8,500 crore; the Pradhan Mantri Krishi Sichai Yojana, targeted at irrigation, which has been devoted nearly Rs 5,500 crore, and so on.
The projected 14-times increase in EBRs will be equivalent to 0.7 percent of the GDP. EBRs are projected to rise further to 0.8 percent and 0.9 percent of the GDP for FY21 and FY22 respectively.
In FY17, the off-budget borrowings through PSUs stood at Rs 9,167 crore.
In the absence of direct resources, the government is keeping its spending cycle up by relying on off-budget tools such as EBRs. If this type of expenditure is tallied, India’s fiscal deficit story would be radically different.
First Published: Jul 19, 2019 12:34 PM IST
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