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Combined GFD of Centre, States up 9.9%: RBI report

Our Bureau

MUMBAI, Aug. 28

THE combined gross fiscal deficit (GFD) of the Centre and the States in 1999-2000 rose to 9.9 per cent of GDP (Rs. 1,93,471 crores) as against the budget estimate (Rs. 1,48,581 crores). In 1998-99, the combined deficit was 8.9 per cent of GDP (Rs. 1,56,9 28 crores) in 1998-99, according to the annual report of the Reserve Bank of India.

The combined revenue deficit rose sharply to a peak of 6.7 per cent of GDP in 1999-2000, accounting for 67 per cent of GFD. The gross primary deficit of the Government sector deteriorated from 3.7 per cent of GDP in 1998-99 to 4.2 per cent of GDP in 1999 -2000.

The Union Budget for 2000-01 has placed the net market borrowing of the Union Government at Rs. 76,383 crores, higher than the amount raised, as per RBI records, at Rs. 73,077 crores in 1999-2000.

Together with the maturing dated securities and repayment of 364-day Treasury Bills, the gross market borrowing requirement of the Union Government will rise to Rs. 1,17,704 crores from Rs. 99,630 crores in 2000-2001. During 2000-01 (up to August 10, 200 0), gross market borrowing amounted to Rs. 63,183 crores as against Rs. 56,130 crores in 1999-2000.

The nominal stock of domestic debt of the combined Government sector has been growing at a rate of about 16 per cent during the later part of the 1990s.

The higher growth in domestic debt than that in nominal GDP growth has led to steady debt accumulation to 60.7 per cent of GDP by end-March 2000.

The debt growth remained below the nominal GDP growth during the first half of the 1990s and the debt growth has generally exceeded the nominal GDP growth since 1997-98, with an exception to 1998-99.

The Union Government finances in 1999-2000 came under pressure from both the revenue shortfall and expenditure overrun, while the State Government finances turned sharply adverse in order to meet the recurrent expenditure requirements mainly on account o f the recent pay revisions.

The overall expenditure (revised estimates) as a result, exceeded the budget estimates by seven per cent. There was also a significant shortfall in tax collections and disinvestment proceeds. Revenue receipts in 1999-2000 fell short of the budgeted targe t by 1.8 per cent.

The gross fiscal deficit increased to Rs. 1,08,898 crores (5.6 per cent of GDP) in the revised estimates as against the budget estimate of Rs. 79,955 crores (four per cent of GDP). The revenue deficit at Rs. 73,532 crores (3.8 per cent of GDP) exceeded t he budget estimate by Rs. 19,385 crores and formed almost two-thirds of the GFD.

The net market borrowing of the Union Government (including 364-day T-Bills) at Rs. 73,077 crores, exceeded the budgetary projections by Rs. 15,616 crores (27.2 per cent). The RBI's support to the market borrowing programme by way of private placements/d evolvements of dated securities and devolvement of 364-day T-Bills at Rs. 29,267 crores in 1999-2000 was lower than Rs. 39,777 crores in 1998-99. The initial subscription was offloaded through net open market sales amounting to Rs. 30,861 crores.

In the Budget for 2000-01, both the revenue deficit and the fiscal deficit are slated to be brought down to 3.6 per cent and 5.1 per cent of the GDP respectively, from 3.8 per cent and 5.6 per cent in 1999-2000 (revised estimates). The primary deficit is also budgeted lower at 0.5 per cent of GDP than 0.9 per cent in the previous year.

The focus of fiscal reform underlying the Budget is on further strengthening expenditure management, restructuring and rationalisation of both direct and indirect taxes.

The tax measures proposed in the Budget rests on the principles of stability, economic growth, rationalisation and simplification to strengthen the ongoing reform process. On the indirect tax front, the Budget had proposed to introduce a single rate Cent ral Value-Added Tax (CENVAT).

The existing three ad valorem rate of basic excise duty, namely 8, 16 and 24 per cent would accordingly converge into a single rate of 16 per cent CENVAT with Modvat benefits.

The consolidated fiscal deficit of States in the revised estimates for 1999-2000 stood at 4.8 per cent of GDP, representing an increase of 0.9 percentage points over the budget estimates and 0.6 percentage points over that of 4.2 per cent in the accounts of 1998-99, the RBI report said.

The slippage of 0.9 percentage points in GFD was on account of mainly expenditure overruns (0.7 percentage points) exacerbated by the revenue shortfall (0.2 percentage points) . The revenue deficit for 1999-2000 overshot its projected level by 42 per cen t to Rs. 56,815 crores (2.9 per cent of GDP) accounting for almost 92 per cent of the rise in GFD.

The primary deficit at Rs. 49,110 crores (2.5 per cent of GDP) suffered a serious deterioration from the budgeted level of Rs. 31,658 crores (1.6 per cent of GDP in 1999-2000).

The revenue expenditure overshot the Budget estimates by 4.8 per cent while revenue receipts fell short by two per cent from the budget estimates. The consolidated revenue expenditure of twenty four states, showed a growth of 23.4 per cent in 1999-2000 o ver the previous year.

The guarantees given by the Union Government in nominal terms rose from Rs. 50,575 crores to Rs. 74,606 crores between end-March 1992 and end-March 1999. However in relation to GDP, the outstanding guarantees declined from 8.2 per cent of the GDP to 4.2 per cent during the same period.

Recognising the importance of funding guarantees, the Union Budget for 1999-2000 proposed a guarantee redemption fund aimed at promoting transparency and curbing the growth of contingent liabilities.

The outstanding State Government guarantees (17 major states) as ratio to GDP stood at 4.7 per cent, at end-March 1999, lower than the level of 6.5 per cent as at end-march 1992. However the nominal stock of guarantees has witnessed an annual average gro wth of 11.1 per cent between end March 1992 and end-March 1999.