Many thanks to the Union Finance Ministry for their detailed response to my article, ‘The macro-economic landscape has changed over the past month’, published in Mint on 3 March 2023.
The point raised in my concluding paragraph was very simple. Budgetary Borrowing by Food Corporation of India (FCI) 1.05 trillion from “other sources” is shown in Statement 25 of the expenditure profile. Such budgeted amount is deemed to be the outstanding debt of “other sources”, with which the financial year 2023-24 will end. I disagree with the statement of the Ministry’s response which states: “This amount represents the peak expected level of arrears during the financial year and is not necessarily the closing balance.” In the limited case, if before the end of the financial year budgeted to reduce the peak to zero, the budget estimate shown in the statement will be zero, not 1.05 trillion.
The statement shows the expected balance at the end of 25 years net of intra-year redemptions and not the intra-year peak. This is a budget estimate. Actual may be less. Similarly, sum of 40,000 crore through suppliers’ credit both in the current year and next year is a rolling source through which the large scale working capital requirements of FCI are met.
The purpose of the borrowing (working capital) employed and its source (the bank, not the National Small Savings Fund) are factual matters not relevant to the point I was making in the article, which is the expected balance at the end of the year “Others sources”, which should have been included in the Union Budget and not as an off-budget item. It cannot be denied that some part of working capital requirement of FCI was actually routed. The Union Budget as well as the Finance Ministry’s response have rightly pointed this out.
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