Government borrowing hits 89 per cent of year’s target at Rs366,000 crore

The government has announced fresh sale of Rs14,000 crore worth of bonds, taking its borrowing so far during the fiscal to Rs366,000 crore, about 88.6 per cent of the budgeted level of Rs413,000 crore.

The government had raised its borrowing target by Rs52,872 crore in the second half of the fiscal, in September 2011, raising its borrowing target for the whole of the financial year to a record Rs470,000 crore - a 13.5 per cent jump from the budget target of Rs413,000 crore.

With tax collections slowing in the second half of the fiscal and a volatile market upsetting the government's Rs40,000-crore divestment target, its fiscal deficit could climb to levels unseen so far.

This could also jeopardise the prospects of a much-needed interest rate cut, which is seen by many as the major constraint for investment and economic growth.

''Lower interest rates are likely only when fiscal deficit is down.'' Planning commission deputy chairman Montek Singh Ahluwalia said on the sidelines of the concluding day of the Pravasi Bharatya Divas. He said the government's fiscal deficit is expected to be more than the budget estimate of 4.6 per cent of the country's GDP this fiscal.

With GDP growth slipping to 6.9 per cent in the second quarter of the current financial year (2011-12), the economy is estimated to have grown at a slow pace of 7.3 per cent in the first half of the financial year, against 8.6 per cent in the year-ago period. Growth for the whole fiscal may well slip below 7 per cent.