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The Government's projected borrowing of Rs 3.43-lakh crore for FY-12 will not pose too much of a challenge in terms of managing it, according to Dr Subir Gokarn, Deputy Governor, Reserve Bank of India. The borrowing programme is roughly comparable with the previous year's borrowing of around Rs 3.45-lakh crore. The Government also plans to borrow Rs 15,000 crore through Treasury Bills, according to Budget 2011-12.
The government securities market witnessed a mild rally on Monday. As compared with last Friday's close, yields thawed by about seven basis points even as prices moved up 35-40 paise in response to Budget announcements on borrowing and fiscal deficit. Yield and price of a bond are inversely related.
“As a result of the reduction in the deficit-to-GDP ratio, the absolute amount of the borrowing requirement is about the same. But as a percentage of the overall size of the market, it does not provide a shock at all. In the aggregate sense, as a percentage of overall credit flows, overall deposits growth and so on, this does not pose too much of a challenge in our estimate in terms of managing,” said Dr Subir Gokarn, Deputy Governor, RBI, in an interaction with the media.
The Deputy Governor observed that the combined impact of revenue and expenditure has resulted in the combined fiscal deficit to GDP ratio in 2010-11 of 5.1 per cent, which is significantly lower than the budgeted number of 5.5 per cent, reflecting both the growth in the economy but perhaps more significantly the realisations from telecom spectrum auctions and disinvestment.
“The Government is clearly committed to maintaining the momentum from disinvestments. So, the contribution from this source will hopefully be significant in the coming year. This will help to rein in the deficit and the 4.6 per cent estimate for 2011-12 actually provides some relief in terms of the macroeconomic impact of the fiscal position,” said Dr Gokarn.
According to Mr Baljinder Singh, Dealer, Andhra Bank, the moot question is whether the fiscal deficit projection of 4.6 per cent and the borrowing of Rs 3.43-lakh crore were sustainable in view of all the projected expenditure relating to various social sector programmes and subsidies.
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