Finance Minister Arun Jaitley is relying on a windfall from telecom spectrum auctions and a robust mop-up from disinvestment to keep the Centre’s finances on even keel.

This especially as Jaitley has set for himself, in the 2016-17 Budget, a stiff fiscal deficit target of 3.5 per cent of GDP. Also, on top of the continued public spending, the Centre faces the implementation of the Seventh Pay Commission report and the One Pension One Rank salary commitment it has made to the armed forces.

But a senior official said confidently: “We are on track to meeting the fiscal deficit target. We expect some additional revenue from telecom spectrum auction but, as of now, we are sticking to the Budget Estimates.” The proceeds from disinvestment, he said, are on course, helped by capital restructuring exercises such as share buybacks by public sector units. Further, crude oil prices continuing to rule low has helped keep the subsidy burden in check, giving the Exchequer the breathing space.

Besides lowering inflationary pressures, and creating space in the medium term for monetary easing, keeping the fiscal deficit reined-in will raise the the government’s stock with investors.

Fiscal deficit

The Centre’s fiscal deficit had touched ₹3.26-lakh crore in the first quarter of the fiscal or 61 per cent of the Budget Estimate, but officials are confident of the Centre getting its fiscal math right in the coming months. Data for fiscal deficit till the month of July will be released on August 31.

Analysts too are optimistic. As India Ratings said in a recent research note: “Despite a bit rusty fiscal arithmetic, we expect that the government will still be able to achieve its fiscal deficit target.”

Crisil, too, was confident that the oil prices would “remain at $40-45 per barrel in 2016. That will help keep inflation, fiscal deficit and current account deficit under control.”

Sources said that the government is being conservative, but it can still expect at least an additional ₹10,000 crore from the spectrum auction. The Budget had pegged the mop-up under this head at ₹55,000 crore, while the total revenue from communication services is estimated to top ₹98,995 crore in 2016-17. In tandem, the Finance Ministry is confident of achieving most part of the disinvestment target of ₹56,500 crore through exercises such as capital restructuring of PSUs.

“At least a dozen state-run firms will go in for share buybacks this fiscal and we expect at least ₹15,000 crore from this,” said an official, adding that minority stake sales and plans for an exchange-traded fund should also help rake in significant funds.

Though it faces a significant outgo on account of the Seventh Pay Commission, it can take some comfort that an arrears payout of only around ₹40,000 crore is expected. “This will be given in September. A part of it — at least ₹10,000 crore — will revert to the government as tax,” said another official.

Further, the Finance Ministry also hopes that tax revenues will be robust and hit the modest growth projections in the Budget. The Centre has projected total tax revenues of ₹16.3-lakh crore this fiscal against the Budget target of ₹14.49-lakh crore last fiscal.

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