A report by the Comptroller and Auditor General (CAG), that has now come to the fore, suggests that key deficit figures of the central government for the financial year 2017-18 are significantly higher than what it had furnished.
According to an Economic Times report, CAG has recalculated the fiscal deficit for FY18 to 5.85 percent – a whopping 69.07 percent more than the 3.46 percent the government had claimed.
The auditor has also pointed at a similar mismatch in the revenue deficit numbers for the financial year 2017-18.
Here is a lowdown on the discrepancy that the CAG has highlighted:
WHY DID CAG COME UP WITH THE REPORT?
On 8 July, three days after the Union Budget 2019-20 was presented, CAG had reportedly enquired the 15th Finance Commission whether “extra-budgetary resources accounted for in the budget reflect the correct picture,” the Economic Times report said.
Extra budgetary resources refer to the resources raised by the PSUs through profits, loans and equity. In order to make its case, the auditor flagged its version of deficit numbers, according to the report.
CAG also found that the revenue deficit in 2017-18 was actually 3.48 percent of GDP and not 2.59 percent as reported.
WHY IS THE MISMATCH IMPORTANT?
For starters, fiscal deficit and revenue deficit are important markers of the health of any economy and any discrepancy in these numbers is a matter of concern.
A more nuanced reason is the fact that the deficit numbers suggested by the government in recent times have come under scrutiny as it has expanded its off-budget borrowings to fund expenses.
Off-budget borrowings are those borrowings by state-owned firms that are not part of the official budget calculations but are used to fund government schemes.
An off-budget borrowing is excluded from the fiscal deficit calculations though it does add to the total debt of the government.
Another reason for worry is that the CAG's aspersions puts the government's claims of being on a path of fiscal consolidation, under the scanner. For the record, the government has targeted to keep fiscal deficit at 3 percent of the GDP by 2020-21.
HOW DID CAG ARRIVE AT THE DISCREPANCY?
In its report, CAG estimated off-budget borrowings for revenue expenditure at 0.96 percent of GDP, and off-budget borrowings for capital expenditure at 1.43 percent of GDP. The two numbers add up to the 2.39 percentage point difference between the CAG and government figures.
CAG’s calculation takes into account the outstanding liabilities of various public sector units that borrow to cover expenditure on government programmes, according to the Economic Times report.
The auditor has also factored in the loans provided to beneficiaries of Pradhan Mantri Ujjwala Yojana (PMUY) in FY18 by oil marketing companies and other liabilities, according to the report.
(With inputs from The Economic Times)
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