The Government has announced yet another round of borrowings amounting to Rs 40,000 crore for the current fiscal.
With this, the total additional borrowing for the current fiscal is almost equal to one per cent of the Gross Domestic Products (GDP).
Meanwhile, new data released by the Government showed that the fiscal deficit has already crossed 85 per cent of the Budget Estimate in the first eight months of the ongoing financial year. Since both these figures were released after market hours on Friday, the bond market could witness lower prices, once it reopens on January 2.
“We have reviewed the cash requirement for the first five weeks of 2012-13. It also includes redemption of dated securities amounting to Rs 59,000 crore. Accordingly, the Government in consultation with the Reserve Bank of India decided to go for second additional borrowing during second half of the fiscal,” a senior finance Ministry official said. The Government and the RBI will continue to have the flexibility to modify the notified amount and timing for auction of Treasury Bills depending upon the requirements of the Government, evolving market conditions and other relevant factors, he added.
Earlier on September 29, the Government announced additional borrowing of Rs 52,872 crore. With the latest addition, the total borrowing has crossed Rs 5 lakh crore. This has also raised the apprehension of a much higher fiscal deficit from the target of 4.6 per cent. Various agencies are anticipating that with additional borrowings, the deficit might cross 5.5 per cent.
Although the Finance Ministry official refused to guess about the new fiscal deficit number, he said all will depend on the revised target of revenue collections to be announced in the Budget. The Government has already said that the fiscal performance of first half indicates that it would be a challenge for the Government to meet the deficit targets set in the Budget Estimates.
With lesser than expected collections from advance tax paid by corporates, the Tax Department is apprehending a shortfall in tax collection. On the other hand, the Government has still not been able to devise a way for share buy back by state-owned enterprises as an alternative to disinvestment.
petroleum & fertiliser subsidies
Meanwhile, petroleum and fertiliser subsidies are all set to exceed the Budget Estimates. The Government has assured that the borrowing calendar has been prepared in such a manner that it will not crowd out funds for private sector investment.