Amidst calls for a booster shot to the economy, the Finance Ministry and the Reserve Bank of India are expected to meet on Thursday to finalise the Centre’s borrowing calendar for the second half of the financial year.
The Centre has a gross borrowing space of ₹2.08 lakh crore for the six month period between October 2017 and March 2018. It has already raised ₹3.72 lakh crore or 64 per cent of its annual gross borrowing target in the first half of the fiscal.
The Budget had pegged the Centre’s gross borrowing target at ₹5.8 lakh crore and net borrowings at ₹4.25 lakh crore. Buybacks of ₹75,000 crore are also planned in the current fiscal.
But, despite expectations of more borrowing to fund a stimulus package, the Finance Ministry is expected to stick to its borrowing plan in order to meet the fiscal deficit target of 3.2 per cent of the GDP.
“Instead of additional expenditure, it is necessary that Departments and Ministries focus on fully utilising the already allocated funds,” noted a senior official.
Analysts also point that the limited fiscal space is a challenge.
“The availability of fiscal space with the government is questionable,” said Devendra Pant, Chief Economist, India Ratings, adding that a shortfall in revenue is expected due to lower dividend payment from the RBI and also less-than-expected proceeds from disinvestment and telecom.
The Finance Ministry is instead hoping for a further reduction in policy rates to help boost domestic demand and spur growth as various forecasts show that growth may be lower than anticipated this fiscal.
The Monetary Policy Committee will hold its next bi-monthly policy review on October 3 and 4. However, analysts expect a status quo after the Committee led by RBI Governor Urjit Patel lowered the repo rate by 0.25 per cent to 6 per cent in its last review in August.
“The central bank is stuck in a conundrum of low growth, mild inflation, saving financialisation and external uncertainties. This will make the job difficult for RBI on October 4,” State Bank of India said in its research report EcoWrap, adding that it expects the Committee to leave the rates unchanged.
Supplementary demand
Ahead of the Winter Session of Parliament, the Finance Ministry has called for proposals for the second supplementary demand for grants.
Apart from urgent cases or where instructions have been given to seek funds now, the Ministry has said, “All other cases may be with-held and move over to the third and final batch of Supplementary Demands for Grants for the current year due in the Budget Session.”
Proposals have to be submitted for the minimum necessary amount after a thorough review of savings, it further said.