The Hindu Business Line : Centre feels impact of buying out RBI’s stake in SBI

New Delhi, Aug. 31 The acquisition of the Reserve Bank of India’s 59.73 per cent stake in the State Bank of India (SBI) by the Centre has led to a 49.8 per cent jump in its fiscal deficit during the first four months of the current fiscal.

According to the Controller General of Accounts’ (CGA) latest data, the Centre’s fiscal deficit for April-July 2007, at Rs 129,408 crore, was Rs 43,004 crore higher than the corresponding four-months figure of Rs 86,404 crore last year.

But this sizable ballooning is mainly a result of the Centre acquiring RBI’s entire holding in SBI, which entails an extra capital expenditure of Rs 35,531 crore.

If this extra expenditure is excluded, the Centre’s fiscal deficit would have gone up by only 8.6 per cent, from Rs 86,404 crore during April-July 2006 to Rs 93,877 crore during April-July 2007.

The impact of the acquisition on the Centre’s finances will be neutralised when the CGA releases its data for August.

This is because the Rs 35,531 crore capital expenditure will be largely offset through a corresponding transfer of the RBI’s profits to the Centre.

In the transaction

This transaction — which has been recorded in the current month — includes Rs 34,308 crore on account of RBI’s profit on sale of its stake in SBI, with the book value of the shares representing the remaining Rs 1,223 crore.

For April-July 2007, the Centre revenue deficit (excess of current spending over receipts from taxes and other current receipts) amounted to Rs 82,400 crore, which was higher than the Rs 78,210 crore during April-July 2006.

Net tax revenues for this period were 25.6 per cent higher (Rs 79,911 crore versus Rs 63,640 crore), while non-tax revenues rose by 12.3 per cent (from Rs 13,696 crore to Rs 15,380 crore).

On the other hand, total revenue expenditure during April-July 2007, at Rs 177,691 crore, stood 14.2 per cent higher than the Rs 155,546 crore for April-July 2006.