Business IdeasIndia may borrow less after outlay cuts: Finance Secretary
The government might consider selling fewer bonds in the year ending March after announcing expenditure cuts yesterday, Finance Secretary Ashok Chawla said.
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“If there are substantial savings” due to the reductions in spending, then “borrowings may come down to that extent,” Chawla told reporters in New Delhi today, without giving details. The government would review the borrowing programme for the six months to March 2010 in the next two weeks, he said.
The finance ministry announced cuts in expenditure by government ministries on domestic and foreign travel, publications, advertising and purchase of vehicles. The plan will see a 10 per cent reduction in this so-called non-Plan expenditure.
Finance Minister Pranab Mukherjee on July 6 unveiled plans to borrow a record Rs 4.51 lakh crore rupees to fund spending aimed at boosting an economy predicted by the central bank to expand at the slowest pace since 2003. Higher borrowing is expected to widen the budget deficit to a 16-year high of 6.8 percent of gross domestic product, putting pressure on the nation’s sovereign ratings.
“In view of the current fiscal situation and arising out of insufficient rain in large parts of the country and the consequent pressure on the government resources, there is need for further rationalisation of expenditure,” the finance ministry said in a note detailing the cuts.
Rising Yields
Benchmark 10-year bond yields have climbed a record 2.11 percentage points this year as government debt sales increased. The yield, which rose to a 10-month high of 7.5 percent on September 4, will increase to 7.75 per cent in about a month, according to IDBI Gilts Ltd., a primary dealer in Mumbai that underwrites federal bond auctions.
Finance Minister Mukherjee yesterday said India’s $1.2 trillion economy might expand “6 per cent plus” in the 12 months to March, slower than the average 8.7 percent growth in the previous four years, as a shortage of rain reduces harvests.
Rainfall this year may be 15-to-20 percent less than the country’s 50-year average, making it the weakest monsoon since 2002, India Meteorological Department said yesterday.