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In what could be seen as strong intention to keep the fiscal deficit within the revised target, the Finance Ministry has announced reduction of market borrowing for the current fiscal.
The Government aims to keep the fiscal deficit within the revised target of 5.3 per cent for 2012-13.
“On review of the Government of India’s cash position and funding requirement, it has been decided, in consultation with Reserve Bank of India (RBI), to reduce the Government market borrowing through dated securities by Rs 12,000 crore for the current financial year. Accordingly, the auction for dated securities scheduled on February 22, 2013 for Rs 12,000 crore has been cancelled,” a Finance Ministry statement said. This was the last tranche of the auction scheduled.
It was announced in the Budget that gross borrowing will be Rs 5.69 lakh crore for the current fiscal. The Government borrowed nearly Rs 3.70 lakh crore in the first half (April-September, 2012), while remaining Rs 2 lakh crore was scheduled to be raised in the second half (October, 2012-March, 2013).
Till date, the Government has so far borrowed nearly, Rs 5.58 lakh crore.
Commenting on the latest move, Chief Economist and Head (Public Finance) of India Ratings and Research Devendra Kumar Pant said, “The Government is putting some control on the expenditure and with this decision it is evident that the fiscal deficit will be under check.”
Echoing a similar sentiments, Crisil’s Chief Economist D.K. Joshi termed the decision as strong signal towards containing the fiscal deficit.
Senior Economist with ICRA Aditi Nayar feels that cancellation of the planned borrowing does not necessarily mean a reduction in the fiscal deficit relative to the budgeted level. Rather, it is related with cash management.
A shortfall relative to the Budget estimates for 2012-13 for customs duty, excise duty and corporation tax collections as well as non-tax revenues from telecom seems inevitable, she added.
“Around 30 per cent of the Government’s budgeted revenue expenditure for 2012-13 is towards inflexible expenses like interest payments and pensions. While overall expenditure growth was flat during the quarter ending December 31, 2012 in year-on-year terms, there is a likelihood of deferral of some expenditure, possibly on fuel and fertiliser subsidy, to the next fiscal in order to contain the fiscal deficit within the revised cap of 5.3 per cent,” she explained.
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