India to plan Rs.250 billion more borrowing in 2nd half .

New Delhi: India’s government may consider borrowing an extra Rs.250 billion after setting a higher budget deficit target for the year ending 31 March, said two finance ministry officials with direct knowledge of the matter.

The ministry will decide by the end of January or early February if it will raise the additional amount by selling government securities or treasury bills, the two people said, asking not to be identified as they aren’t authorized to speak on the subject.

Finance minister Palaniappan Chidambaram has vowed to cap the deficit at 5.3% of gross domestic product for the 12 months through March, versus an earlier target of 5.1% proposed by his predecessor.

India plans to raise Rs.2 trillion in the second half of the fiscal year, economic affairs secretary Arvind Mayaram told reporters in New Delhi on 27 September, leaving the target unchanged for the whole year at Rs.5.69 trillion.

The nation’s budget deficit is the widest among major emerging economies as slower growth hurts tax receipts and subsidies fan spending, imperiling the government’s goal of narrowing the gap from 5.8% last year.

 Officials boosted diesel prices on 14 September to restrain expenditure on compensation for below-cost sales.


Standard & Poor’s and Fitch Ratings reduced the outlook on India’s credit rating to negative from stable earlier this year, bringing the nation a step closer to junk status, citing fiscal and current-account imbalances.

Trimming Subsidy

The benchmark 10-year bond yield has declined 35 basis points (bps) since the end of March, with the yield on the 8.15% note due June 2022 trading at 8.19% as of 10.01am in Mumbai, according to data compiled by Bloomberg. The rupee weakened 6% in the same period, the worst performance in Asia, and was at 54.125 a dollar.

Sovereign-debt issuance will exceed the target for the year ending 31 March by Rs.500 billion, according to the median of eight estimates compiled by Bloomberg in September.

The Department of Economic Affairs estimates the revenue shortfall for the year ending 31 March at Rs.200 billion, while the revenue department says it could be Rs.600 billion, Bloomberg TV India reported today, citing people it didn’t identify.

Prime Minister Manmohan Singh is trying to trim a subsidy bill for food, fuel and fertilizer by 12% to Rs.1.9 trillion in the year through March 2013. The government also aims to raise Rs.300 billion from share sales by state companies.

The disinvestment program and a push to step up tax collection will be the key to meeting the goal of 5.3% of GDP, the two people said.

Source : livemint.com