AgenciesGoI's reported move to take on some more old off-budget debt on its own books in the next budget is appreciable. This is likely to include past borrowings of the Housing and Urban Development Corporation (Hudco) and National Bank for Agriculture and Rural Development (Nabard).
The continuation of cleaner accounting practices and transparency will enhance the credibility of fiscal data reported by the government and bolster the sanctity of the budget numbers. This includes GDP data, of which the first-quarter figures of the current fiscal will be released later today. Over the last three years, GoI has brought all below-the-line items above the line.
It has done away with loans from the National Small Savings Fund (NSSF) to the Food Corporation of India (FCI). Rightly, the 2022-23 budget has not relied on extra-budgetary resources in which borrowings by assorted central public sector enterprises and other government undertakings are guaranteed and serviced by GoI.
Hudco raised about ₹20,000 crore in FY2019 through bonds fully serviced by the Centre. And, the disclosure, or even paying up of some of these liabilities, would hinge on the availability of fiscal space. Rightly, the central government is also nudging states not to take recourse to off-budget borrowings and bring greater transparency in their budgets. The off-budget borrowings by states - loans raised by state-owned entities and guaranteed by the state governments - touched around 4.5% of GDP in 2022. Reserve Bank of India (RBI) data shows that contingent liabilities have surpassed 5% GSDP in states like Punjab, Rajasthan, Uttar Pradesh and Andhra Pradesh.
The power sector alone accounts for about 40% of these guarantees. State government guarantees for rising off-budget borrowings, mostly by their respective distribution companies, have increased the risks of debt sustainability. State finances would deteriorate sharply if the guarantees are invoked. So, distribution reforms to put paid to runaway populism in power and the levy of reasonable user charges must not be delayed.
The continuation of cleaner accounting practices and transparency will enhance the credibility of fiscal data reported by the government and bolster the sanctity of the budget numbers. This includes GDP data, of which the first-quarter figures of the current fiscal will be released later today. Over the last three years, GoI has brought all below-the-line items above the line.
It has done away with loans from the National Small Savings Fund (NSSF) to the Food Corporation of India (FCI). Rightly, the 2022-23 budget has not relied on extra-budgetary resources in which borrowings by assorted central public sector enterprises and other government undertakings are guaranteed and serviced by GoI.
Hudco raised about ₹20,000 crore in FY2019 through bonds fully serviced by the Centre. And, the disclosure, or even paying up of some of these liabilities, would hinge on the availability of fiscal space. Rightly, the central government is also nudging states not to take recourse to off-budget borrowings and bring greater transparency in their budgets. The off-budget borrowings by states - loans raised by state-owned entities and guaranteed by the state governments - touched around 4.5% of GDP in 2022. Reserve Bank of India (RBI) data shows that contingent liabilities have surpassed 5% GSDP in states like Punjab, Rajasthan, Uttar Pradesh and Andhra Pradesh.
The power sector alone accounts for about 40% of these guarantees. State government guarantees for rising off-budget borrowings, mostly by their respective distribution companies, have increased the risks of debt sustainability. State finances would deteriorate sharply if the guarantees are invoked. So, distribution reforms to put paid to runaway populism in power and the levy of reasonable user charges must not be delayed.
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