The Government will borrow Rs 2.20 lakh crore for the second half (October 2011-March 2012) of the current fiscal. This is nearly Rs 53,000 crore more than the budgeted amount.

The Economic Affairs Secretary, Mr R. Gopalan, said that the additional borrowing was because of lower Government cash balances and the net outflow of small savings. But there will be no change in the fiscal deficit target of 4.6 per cent for the current fiscal year, he added.

The Government is also certain that the extra borrowing will not affect private investment. “The borrowing calendar has been prepared in such a manner that it will not crowd out private sector investment,” a senior Finance Ministry official said.

Revenues have been under pressure as disinvestment has dried up and there are no revenues of the “3G fees kind' this fiscal. Also, with higher interest rates on the bank deposits, money has shifted there from small savings. The net outflow is approximately Rs 11,000 crore.

The Government was expecting Rs 24,182 crore through small savings but there has been no fresh accretion till date.

As for cash balances, the Government has budgeted Rs 33,000 crore as the opening balance but this came down to Rs 16,000 crore. This is also a cause for the extra borrowing in the second half.

Analysts say that the advance tax collection for the quarter ending September 15 clearly reflected the slowdown. This could affect the corporate tax collection as well as excise tax.

Meanwhile, higher borrowing has led to decline in the bond prices. Even announcements like less borrowing through the treasury bills and completion of the auction by February could not lift prices. Lower prices helped the yield on the benchmark 10-year gilt to touch an eight-week high after traders sold due to higher than expected bond supply.

Shishir.s@thehindu.co.in

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