Govt cuts extra loans to Rs 200 bn, FY18 fiscal deficit could reach 3.4%

Budget 2018

The government has announced that it is reducing additional borrowing to Rs 200.00 billion from Rs 500.00 billion earlier, in the current financial year (FY18), signalling to markets and experts about the Centre’s commitment to fiscal consolidation.

But even then, the fiscal deficit may reach up to 3.4 per cent of gross domestic product (GDP), higher than the 3.2 per cent pegged in the Budget for 2017-18.

This reduction in borrowing largely came because the government expects the Reserve Bank of India (RBI) to transfer to it a higher-than-anticipated surplus in FY18, a few senior government sources have confirmed independently to Business Standard. Besides, direct taxes have come to the help to the government, rising by 18.7 per cent till January 15, against the Budget target of 15.7 per cent for FY18, according to figures released by the government on Wednesday.

In its books, the RBI had made a provision for Rs 131.40 billion for transfer to a contingency fund. This amount could be transferred to the Centre to bridge the gap, and, in turn, reduce the fiscal slippage.

In December last year, the Centre had stated that it would raise an additional Rs 500 billion from the market in this financial year, causing bond yields to spike. Its net borrowings were budgeted at Rs 4.23 trillion for 2017-18. Adding redemption, gross borrowings were projected to be Rs 5.80 trillion.

The announcement came after widespread concerns over the revenue falling short of expectations, especially on account of shortfall in the goods and services tax (GST) collections.

In a press release, the finance ministry has now said, "Upon a review of trends of revenue receipts and expenditure pattern, it has been assessed that additional borrowing of only Rs 200.00 billion of government securities would be adequate to meet financing needs."

The statement said the government did not accept borrowings of Rs 150.00 billion in the last three auctions. The remaining Rs 150.00 billion would be reduced from the notified borrowing programme of the ensuing weeks, it said.

A source in the government that Business Standard spoke to said, "The disinvestment target for the year is expected to overshoot the Budget Estimate by quite a margin. Things are looking up on the direct taxes front as well

Read More

Hi, My name is dimple shah and this is the News article Blog