A day after Prime Minister Manmohan Singh said increased public expenditure is important to tackle the projected slowdown in the Indian economy, finance minister P Chidambaram acknowledged that the government would borrow beyond its budgeted target this fiscal. The fiscal stimulus is expected to charge up the economy, which is slowing under the effects of the global financial crisis, although it would widen the government's fiscal deficit.
"There are only three ways of meeting government expenditure: higher taxes, savings and borrowing. There will be some extra borrowing, but I can't tell you now how much," Chidambaram told reporters outside Parliament. The government plans to borrow Rs 1.45 lakh crore in the current fiscal and, according to its borrowing schedule, will exhaust the sale of government debt paper by December. It has already issued paper worth Rs 96,000 crore to September. The government has sought Rs 1,05,613.38 crore in extra funds in its biggest-ever supplementary demand for grants tabled in the Lok Sabha on Monday. Meanwhile, Chidambaram and petroleum minister Murli Deora ruled out any immediate reduction in the domestic price of petrol, diesel or cooking gas (LPG), clarifying that the price of crude that India imports has to stabilise at around $61 a barrel before any reduction in fuel prices is even considered. Such a cut now could potentially place additional pressure on the exchequer. The finance minister indicated that borrowings have to be raised to generate extra funds. Although the move may lead to breaching the fiscal deficit target of 2.5% of GDP in 2008-09, a stimulus package is seen as imperative in these contractionary and uncertain times. It could also be a pointer to another rate cut by RBI at its mid-term monetary policy review on Friday, following a 100-basis point reduction in the repo rate on Monday. Besides the fiscal push, additional borrowings will also make government paper available to banks to use as collateral while borrowing from the RBI's liquidity adjustment facility, which would further improve the liquidity situation. The government may issue additional paper worth Rs 30,000-40,000 crore, analysts say. The sale of additional paper also means the government can suck out any surplus liquidity that may emerge later because of recent measures to assist banks. This would ensure that the extra liquidity does not feed into inflation . "It's now clear that the government will go to the market around the end of December to raise money," said Canara Bank chief economist Manoranjan Sharma. http://www.financialexpress.com/news/FM%20confirms%20more%20govt%20borrowings/376311/ Fear is not the natural state of civilized people. --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "Kences1" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [EMAIL PROTECTED] For more options, visit this group at http://groups.google.com/group/kences1?hl=en -~----------~----~----~----~------~----~------~--~---
