Disinvest in first half of fiscal: RBI

The RBI has suggested to the government to take up its disinvestment plans in the first half of the financial year (April-September) so that the rush to garner funds does not let the government resort to cutbacks in capital expenditure in the year-end and thereby hinder development programmes.

“Plans for disinvestment need to be front-loaded to take advantage of supportive market conditions, and also to forestall cutbacks in capital expenditure to meet deficit targets,” the Reserve Bank of India said in its Annual Report for 2014-15.

It said cutbacks in capital expenditure will compromise the quality of fiscal consolidation. Fiscal consolidation refers to reduction in fiscal deficit.

The government has budgeted a receipt of Rs 69,500 crore through disinvestment in 2015-16, of which Rs 28,500 crore is expected to be mobilised through strategic disinvestments. In 2014-15, the government’s non-tax revenue was also lower than budgeted due to lower revenue collection. There was large shortfall in the capital receipts, including disinvestment.

This shortfall led to a sharp cutback in Plan expenditure by more than 20 per cent, both on the revenue and capital accounts, in order to meet deficit targets.