There are not going to be any receipts from Spectrum
With India not likely to buy and sell LTE specturum for some time to come (4G for those new to the lexicon) and the CAG working overtime, the disinvestment target and other extraordinary receipts are unlikely to bridge indian public profligacy ( in social welfare and health by any stretch? no, the frozen budgets in planned defence, infra and more) Fortunately for the government more people realise that the current budget document is already optimised in terms of no pie in the sky dreamy allocations unlike the NDA and the tweet hungry leadership of the next gen’s likeliest hopes. Though the UPA does not hold too much of an audience no one is close to taking India’s geo political stability but the wallet is spending more in the hope for growth and yet with retail inflation holding higher watermarks for 2012 every passing day, it comes back to the budget and its 4.6% deficit. The first rumors of the overkill were early but the likely amount to be overshot by the year end at its least is still coming out from compatriot and global desks at more than 5%, a good 0.5% gap..showing that most do not expect Indian bureaucracy’s due diligence to hold within the first five months when it comes to reading the reportcard in February next. ( I am not rewriting that, you’ll have to manage with that..and do write back in comments if you can help) The nominal growth in GDP of 15% or even higher may still leave the nation with a sub 7% growth and as fiscal charge in the other direction instead of moving to 3% of GDP
We need a $10 bln Sovereign fund of our own
The first 5 months data are usually the reason to read the crystal ball, and this time we have already achieved the first few successses with record 30% growth in gross tax revenues and 45% growth in Exports. Further down the road, one will note that there have been no changes in the dullness in Investments since the begininning of the post Diwali 2010-11 season Non Tax revenues in the first quarter were as high as INR 2 Tln last year in FY11 and now in FY12 they are only the usual penalties, fines and no spectrum to count only INR 1 Tln in the same period. Also with reserves inching up to $320 bln we will likely get a SWF to channelise all the energy investments we are making to further proactively manage the deficit bill
The success of Revenue and Control mechanisms
Though deficit estimates haven’t been changed by the PMEAC much, deficit achieved in the first 4 months had creeped to more than 55% but the Government Borrowing program expected to be overshot by detractors has remained well within the targeted segment 50-70% of the much controlled INR 4.55 Tln program. The deficit on the fiscal side adds to the woes of the $55 bln trade deficit and the Forex reserves included our national reserves have hardly grown at $320 bln again much ahead of stock critics waiting to and having already criticised the likely $305 bln number in advance, to ready for the sub 7% GDP performance coming next in pre Diwali jitters
Banks will have to burden more in priority sector spending to ensure results in the government’s welfare program with new 10k loans in NREGA, the last INR70k lacs write off in 2009 a high watermark in this case too. Agriloans have fallen 30% since 2009.
The Fuel Subsidy Bill
The Fuel subsidy bill has been paid out in part but yet more than 2/3 of the government share is going to be made only in the March quarter after the bill comes right and till then the likelihood of overreaching and ending up with a higher unpaid share borne by Oilcos ( OMCs) remains high esp with crude holding up at a higher peg and the subsidy bill being likely even 20% higher than the high watermark of last year The subsidy bill has likely increased to INR 400 bln or 40k Crores
The Twelfth plan spends
India has after 5 years of dillydallying finally targeted a higher healthcare expenditure ( MSA commited a target of 2.5% of GDP this year) and is still underspending on Defence and even the otherwise regularly “powered” infrastructure, social welfare and even education spending Tourism is likely to get increased allocations as it demands a 4X increase in the 12 th plan ffrom $1.2 bln last year
Managing the external debt
According to the recent RBI report, India’s $306 bln external debt has commercial borrowings increasing to 28.9% from 17% in March 2010. That is the real good news qith government debt incl guarantees holding less than $87 bln. The Debt Service ratios have however fallen to 4.2 frm 5.2 showing less covered by the existing reserves and the commercial debt increase has happened mostly in short term borrowings ( growing by 24% in treasuries and overnight foreign debt) and the proportion of borrowings in overseas inter bank markets is more than 21% of all our outstanding debt. india’s external debt though is a shining 17% of the GDP lower than most comparable economies and leaving the country with a lot of spare borrowing capacity for non remunerative infrastructure investments.
India aims to spend $1tln in planned and annual budget expenditure on infrastructure in Private partnership incl $60 bln on ports( tripling capacity to 3,000 mln MT, and new allocations for food storage infrastructure. in mst infra heads our spendin g has been less than half the planned spend till 2012 and will come back with cost escalations inthe next plan
Mind the Gap
India’s tax receipts have increased to INR 155,000 crores in the period till August but tax refunds have increased disporportionately by 154% or INR 30,000 crores but on a gross basis still growing by 26% in the first four months and faster in cluding August numbers and yet staying almost still as all of it was paid back in refund demands, net collections still under INR 1 Tln. Corporate receipts have grown mre than 30% but probably tax collection ss will crawl back to March 2011 figures as the slowdown takes effect on balance sheets Our tax revenues have been estimated at INR 5.32 Tln of which till now 30% has been achieved. Even Personal tax collections are higher by 10,000 crores y-o-y