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''RBI may have to pay interim dividend to support Govt resources''

 The government should garner more revenues from disinvestments given that now the stock market is up, and additionally the RBI may have to pay an interim dividend to support resource mobilization, CARE Ratings has said.


Going forward, there is an increased likelihood of lower revenue collections with the government announcement of corporate tax rate cuts and revenues foregone due to export promotion measures.

This will have an impact on fiscal position of the government. At the same time the government has assured that capex will proceed as per plans and hence there will be no compromise here. This means that walking the tightrope will require more dexterity to ensure that there are no more slippages, the agency said .

"The government should garner more revenues from disinvestments given that now the stock market is up. In addition, the RBI may have to pay an interim dividend to support resource mobilization. While the performance so far is satisfactory from now on it will mean careful budgeting to meet all the revenue targets. There may be rollover of expenses depending on the extent of deficit slippage that may take place. While, the slippage might be to an extent of 0.5 per cent of GDP, it would likely be filled through higher borrowing or draw-down of cash balances or withdrawal from NSSF (National Small Savings Fund)", CARE Ratings said in the update on the fiscal position of the government April-August 2019.

The revenue receipts have been 4 per cent higher in the current fiscal year compared with the last year. The percentage of actual collections to budget estimates stood at 30.7 per cent during Apr-Aug'19 compared with 26.9 per cent in Apr-Aug'18. The increase in revenue collections can be attributed to higher receipts from the non-tax revenues viz higher dividends.

The non-tax revenue collections for the first 5 months at 63.4 per cent of the budgeted target have been 23 per cent higher than that in the last year. The tax revenue collections have been at 24 per cent of the budgeted target have fairly been in line with the trend of the previous year. Higher receipts via corporation tax, income tax, CGST, customs was offset by lower collections via union excise duties and service tax.

Disinvestment receipts have been around 12 per cent of the budgeted target during Apr-Aug 2019, similar to that of previous year. The government has incurred lower expenditure towards revenue as well as towards asset creation. In case of revenue expenditure, the percentage of actual collections to budget estimates stood at 42.4 per cent lower than the 43.8 per cent in the comparable period last year and for capex, it stood at 40.3 per cent of the budgeted target compared with 44 per cent in the previous year. Lower expenditure incurred towards roads and railways has resulted in lower capex.

Fiscal deficit, the shortfall between revenues and expenditure, during April-August 2019 stood at 78.7 per cent of the budgeted target. This was significantly lower than the 94.7 per cent in the comparable period a year ago. The widening of the fiscal deficit has been on account of lower inflows of revenues (at Rs 6 lakh crores) and higher expenditure at Rs 11.75 lakh crore (both intractable and capital expenditure) incurred by the government, it added .

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