In the interview, Chidambaram said his Ministry might consider additional borrowing of Rs 20,000-25,000 crore during the fiscal. Chidambaram said this will be to fund a fiscal deficit that is now estimated at 5.3 per cent of GDP.
Announcing the fiscal consolidation plan on October 29, the Minister raised the deficit target from 5.1 per cent of GDP (as announced in the Budget) to a ‘doable’ 5.3 per cent.
A senior Finance Ministry official said any decision on additional borrowing will be taken in January-February as there will be more clarity on the revenue front.
In the Budget, the Government had announced plans to borrow Rs 5.7-lakh crore of which Rs 3.7-lakh crore was mobilised in the first six months.When the Finance Ministry announced its borrowing programme for October-March, it made room for additional borrowing, by proposing to complete the programme by February 15. Technically, the remaining 45-day window will be available for more borrowing this year.
Meanwhile, market experts see Rs 20,000-25,000 crore additional borrowing only in a ‘fair’ scenario, that is, with good tax collection, full realisation of targeted income from disinvestment and spectrum auction, and a cut in the non-Plan expenditure. However, this is not the situation.
The rate of tax growth is below the target, disinvestment is yet to start, while spectrum auction may not fetch more than Rs 15,000 crore as against the Budget target of Rs 40,000 crore.
However, Sonal Verma, an economist with Nomura, has a different take. “Our FY13 (year ending March 2013) fiscal deficit estimate is 5.8 per cent of GDP against the Government’s revised target of 5.3 per cent. If this crash diet continues, the fiscal deficit could be marginally lower than our estimates, but we still do not see it falling below 5.5 per cent of GDP,” she said.
Explaining the ‘crash diet’, she said Government spending rose a paltry 1.4 per cent (year-on-year basis) in September compared with 20 per cent in the April-August period.