Govt’s extra borrowings to touch rs 1 lakh crore


Staff member
New Delhi December 31:

With India’s fiscal deficit in the first eight months of 2011-12 just 15 per cent short of breaching the target, a cash-strapped government today announced that it will borrow another chunk of Rs 40,000 crore during January-March, the last three months for the year to end.

This will be over and above the additional borrowing of around Rs 52,872 crore announced in September. The government accounts data released by the Controller General of Accounts (CGA) for the year till November today clearly indicate that the fiscal deficit Budget Estimate of 4.6 per cent of the GDP will be impossible to meet. The second round of additional market borrowings, again announced today, means the government would have borrowed almost Rs 1 lakh crore extra in 2011-12.

According to figures released, fiscal deficit — total expenditure minus total receipts of the government — reached Rs 3.53 lakh crore during April-November period against the full year target of Rs 4.12 lakh crore. The Reserve Bank of India, that undertakes the borrowings on the government’s behalf, released an indicative calender of dated government securities for the next three months. Almost 55 per cent of the total borrowing of Rs 1,16,000 crore (which includes the additional Rs 40,000 crore) in January-March will be made in January itself.

During the April-November period a year ago, the fiscal deficit was only 49 per cent (compared with 85.6 per cent this year) of the budgeted target. This was because of the windfall gains of Rs 1.06 lakh crore from the auction of 3G and BWA spectrum. The deficit in revenue receipts was 91.3 per cent of the full-year target during the period as against 51 per cent during the same period last year. The total receipts for the April-November period stood at Rs 4.07 lakh crore, merely 48.2 per cent of the budgeted target of Rs 8.44 lakh crore while total expenditure stood at Rs 7.60 lakh crore, 60.5 per cent of the full-year target.

While the non-plan expenditure stood at Rs 5,39,416 crore, 66.1 per cent of the yearly target, plan expenditure was Rs 2,21,278 crore, 50.1 per cent of the budgeted target. The government is being forced to borrow as the direct tax collection is likely to fall short of the targeted Rs 5.32 lakh crore, and the revised indirect tax target of Rs 4 lakh crore looks difficult to meet. The economic slowdown has taken a toll on the bottom lines of the corporate sector and has wiped off a significant chunk from the excise duty collection, thereby threatening to derail the exchequer’s revenue estimate.

The disinvestment plan of the government has also gone awry with the government being able to garner only over Rs 1,000 crore from divesting stakes in Power Finance Corporation. With the domestic industrial production contracting, exports declining, not enough foreign direct investment coming in, coupled with an uncertain developed economies, the hope for revival in revenue generation seems bleak. In the current fiscal, the government budgeted to borrow Rs 4.17 lakh crore from the markets as against the gross borrowing of Rs 4.37 lakh crore last fiscal.

Experts fear that the extra borrowing by the government in the second-half of the year is likely to crowd out private sector credit, while putting a pressure on the liquidity situation. It is to be noted that the subsidy burden is also expected to go up by a whopping Rs 1 lakh crore this fiscal. Parliament approved supplementary grant worth Rs 56,848 crore for the fiscal on account of under-recoveries of oil marketing companies accounting for Rs 30,000 crore. This is in addition to over Rs 9,000 crore sought in the first supplementary demand for grants in August.