Fiscal deficit hits 16% of full year’s count in April
The Economic Times, June 24, 2009, Page 9
Our Bureau NEW DELHI
THE fiscal deficit for the first month of current financial year has shot up to Rs 54,100 crore, or 16.3% of the projected deficit for the entire year, due to accelerated public spending and a sharp drop in revenue collection, data released by the Controller General of Accounts on Tuesday shows.
Fiscal deficit—excess of government expenditure over receipts less borrowings—is a measure of the amount the government needs to borrow to meet its expenditure. Large government borrowing can cause interest rates to go up sharply.
However, bond market dealers, who watch the revenue figures closely as they provide a picture of the government’s financial health, shrugged off the deficit figures.
“The market has already factored in an upwardly revision of borrowing targets. We are waiting to see the quantum of the upward revision. Although there is enough liquidity in the system, if the borrowing target is upwardly revised by more than Rs 50,000 crore, the yields will see an upward spike,” said IndusInd Bank head (global markets group) Moses Harding.
The government has, in the interim budget, indicated a record Rs 3.62 lakh crore of gross borrowings in the year to March 31. This is higher than the Rs 3.06 lakh crore it borrowed a year earlier. In the current fiscal, it has already borrowed in excess of Rs 18,000 crore above its scheduled borrowing till June 26.
Primary dealers in the bond market pointed out that the fiscal gap may narrow in the coming months with tax collection picking up due to a revival in the economy and the government managing to raise money through disinvestment and auction of spectrum for 3G services.
Government spending in April almost doubled from the same period last year even as net tax receipts fell by 32% on an year-on-year basis. However, net tax receipts have started showing signs of revival with May showing an increase of more than 10%. Government expenditure is also expected to move up from the levels suggested in the interim budget as the forthcoming budget is likely to step up public spending.
Replacement for FRBM Act
THE government is likely to come out with a successor to the Fiscal Responsibility & Budget Management (FRBM) Act in the Budget to continue the consolidation of government finances, which got derailed due to the global financial crisis. The duration of the FRBM Act, enacted in 2003, has come to an end. — PTI
The Economic Times, June 24, 2009, Page 9
Our Bureau NEW DELHI
THE fiscal deficit for the first month of current financial year has shot up to Rs 54,100 crore, or 16.3% of the projected deficit for the entire year, due to accelerated public spending and a sharp drop in revenue collection, data released by the Controller General of Accounts on Tuesday shows.
Fiscal deficit—excess of government expenditure over receipts less borrowings—is a measure of the amount the government needs to borrow to meet its expenditure. Large government borrowing can cause interest rates to go up sharply.
However, bond market dealers, who watch the revenue figures closely as they provide a picture of the government’s financial health, shrugged off the deficit figures.
“The market has already factored in an upwardly revision of borrowing targets. We are waiting to see the quantum of the upward revision. Although there is enough liquidity in the system, if the borrowing target is upwardly revised by more than Rs 50,000 crore, the yields will see an upward spike,” said IndusInd Bank head (global markets group) Moses Harding.
The government has, in the interim budget, indicated a record Rs 3.62 lakh crore of gross borrowings in the year to March 31. This is higher than the Rs 3.06 lakh crore it borrowed a year earlier. In the current fiscal, it has already borrowed in excess of Rs 18,000 crore above its scheduled borrowing till June 26.
Primary dealers in the bond market pointed out that the fiscal gap may narrow in the coming months with tax collection picking up due to a revival in the economy and the government managing to raise money through disinvestment and auction of spectrum for 3G services.
Government spending in April almost doubled from the same period last year even as net tax receipts fell by 32% on an year-on-year basis. However, net tax receipts have started showing signs of revival with May showing an increase of more than 10%. Government expenditure is also expected to move up from the levels suggested in the interim budget as the forthcoming budget is likely to step up public spending.
Replacement for FRBM Act
THE government is likely to come out with a successor to the Fiscal Responsibility & Budget Management (FRBM) Act in the Budget to continue the consolidation of government finances, which got derailed due to the global financial crisis. The duration of the FRBM Act, enacted in 2003, has come to an end. — PTI
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