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Informist, Friday, Apr. 11, 2025

 

--Govt source: To use money in some reserve funds to cut fisc gap in future

--Govt source: Some reserve funds in public acct to be "rainy day umbrella"

 

By Krity Ambey

 

NEW DELHI - The government will use the outstanding in some of its reserve funds held in the Public Account as a buffer to reduce its fiscal deficit on "rainy days", a senior finance ministry official said. In the Budget for 2025-26 (Apr-Mar), the government has projected the fiscal deficit 10 basis points lower than expected by dipping into some of these reserve funds, according to Budget documents.

 

The government will transfer INR 230 billion from three reserve funds--the Agriculture Infrastructure and Development Fund, the Universal Service Obligation Fund, and the Oil Industry Development Fund--to part finance expenditure on fertiliser and liquefied petroleum gas subsidies, Pradhan Mantri Fasal Bima Yojana, and Rashtriya Krishi Vikas Yojana, the documents show.

 

These three reserve funds had a closing balance of INR 1.04 trillion in FY25, according to revised estimates. The closing balance in these three reserve funds at the end of FY26 is projected at INR 811 billion.

 

These reserve funds are like a "rainy day umbrella" for the government, the official said. These funds are like the savings individuals have in Public Provident Fund, which can be used for an emergency, the official said. The government had transferred money to the reserve funds from the Consolidated Fund of India, which it intends to withdraw as and when required according to the purpose of the fund, the official said.

 

The government started the practice of withdrawing money from reserve funds in FY25. It had withdrawn INR 139 billion from the Agriculture Infrastructure and Development Fund, the Central Road and Infrastructure Fund, and the Madhyamik and Uchhatar Shiksha Kosh in the last fiscal.

 

The Central Road and Infrastructure Fund and the Madhyamik and Uchhatar Shiksha Kosh had a combined closing balance of INR 506 billion in FY25.

 

The government has 13 reserve funds and each of them is used for a specific purpose. For instance, the government uses the money from the Oil Industry Development Fund for fertiliser and LPG subsidies, while the Agriculture Infrastructure and Development Fund is used for agriculture and rural development schemes.

 

The government can withdraw money from these funds to spend on schemes or subsidies, the official said. The government has also set up some of these funds like the GST Compensation Fund and the Sovereign Gold Fund specifically for debt repayment.

 

The Sovereign Gold Fund, which currently has over INR 200 billion corpus, is set to grow in size going ahead and will be used to repay the sovereign gold bonds that come for redemption, the official said. Similarly, the GST Compensation Fund is currently being used to repay bonds issued by the Centre to compensate states for the revenue loss incurred during COVID-19 pandemic after the introduction of the goods and services tax. The GST Compensation Fund is projected to have a closing balance of INR 1.24 trillion at the end of FY26.  End

 

Edited by Vandana Hingorani

 

 

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