Budget should’ve included any year-end outstanding

Many thanks to the Union ministry of finance for its detailed rejoinder to the last paragraph of my article, ‘The macro-economic landscape has changed over the past month’, published in Mint on 3 March 2023.

The point made in my concluding paragraph was a very simple one. Budgeted borrowing by Food Corporation of India (FCI) of ₹1.05 trillion from “other sources” is shown in Statement 25 of the Expenditure Profile. A budgeted sum like that is understood to be the outstanding debt to “other sources” that the financial year 2023-24 will close with. I disagree with the statement in the ministry’s rejoinder which says: “This amount represents the peak expected level of outstanding during the financial year and not necessarily the closing balance.” In the limiting case, if the peak were budgeted to be wound down to zero before the close of the financial year, the budget estimate shown in the statement would be zero, not ₹1.05 trillion.

Statement 25 shows the expected outstanding at the close of the year net of intra-year redemptions, not the intra-year peak. This is a budget estimate. Actuals may well be lower. Similarly, the sum of ₹40,000 crore through suppliers’ credit both in the current year and next year is a rolling source through which the massive working capital needs of FCI are funded.

The purpose of the planned borrowing (working capital) and the source of it (banks, not the National Small Savings Fund) are factual matters that are not germane to the point I was making in the article, which was that there is an expected outstanding at the close of the year to “other sources”, which should have been included within the Union budget, and not as an off-budget item. This is not to deny that some part of the working capital requirement of FCI was indeed routed through the Union Budget as well, as the rejoinder from the ministry of finance has correctly pointed out.