Govt to revise borrowing targets, growth forecast

The government is set to review its borrowing targets and also revise its growth and inflation expectations for 2012-13 by next month. Accordingly, it is likely to borrow about Rs 20,000 crore extra in the financial year to finance a higher than estimated fiscal deficit of 5.3 per cent in 2012-13.

"There will be some additional borrowing in the current fiscal as the deficit will be higher than expected and tax receipts may be lower than our estimates due to the economic slowdown," a senior official said. Finance minister P Chidambaram in an interview to Reuters said that the government will have to borrow more to fund the higher fiscal deficit.

The Union Budget for 2012-13 had pegged the fiscal deficit at 5.1 per cent of the GDP for which the government was expected to borrow Rs 5.69 lakh crore from the markets. While it raised Rs 3.7 lakh crore through bonds in the first half of the fiscal, it is borrowing another Rs 2 lakh crore in the six months between October and March 2013.

"We will take a final call on the exact quantum of borrowings and the method by January by when we will have a clearer picture of the government's financial situation," the official said, adding that the borrowing plan would be decided in consultation with the Reserve Bank of India.

"The higher fiscal deficit calls for additional borrowings but Rs 20,000 crore will not have much of an impact on corporate borrowing plans," said DK Joshi, senior director and chief economist at Crisil.

Markets also expect to absorb the additional borrowing and bond yields remained flat on Monday. The 10-year benchmark bond yield fell to 8.19 per cent as against its previous close of 8.2 per cent.

Meanwhile, the finance ministry is also expected to lower its growth projection to about 5.7 to 5.8 per cent for the fiscal on the back of the continued slowdown in the manufacturing sector. "The revised growth and inflation forecasts would be included in the mid-year review of the economy that will be placed in the forthcoming Winter Session of Parliament," another official said.

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