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Government s 2H borrowing Government’s borrowing, Rs 2,600 2 600 bn, bn is 56% higher than budgeted Rs 1,671 bn – a slippage of Rs 930 bn. • The Gross and Net borrowing in H2 FY12 may y be 70% and 98% higher g than H2 FY11. • Till now RBI had purchased bonds worth Rs 412 bn. RBI is expected to continue with OMO in coming weeks. • Although the actual deficit can be as high as 5.7% to 5.8% of GDP, Government may try to show a lower deficit by deferring payment and using short term borrowings. • With the expected bad news of additional b borrowing i outt in i the th open, bond b d market k t may now react to other macro parameters. As inflation falls sharply, RBI can shift its focus to growth. Tight liquidity does make a case for CRR cut in near term followed by policy rate cut. • The Government announced the second supplementary grant with additional expenditure of Rs 570 bn (including Oil and Fertilizer subsidy of Rs 300 bn and Rs 138 bn). This takes the additional expenditure to Rs 659 bn including the first supplementary budget. • Government is trying to garner Rs 400 bn of disinvestment revenue through cross-selling of PSU shares and SUUTI monetization. There can be risk to increased borrowing if that does not go through. Confidential

Source : Economic Research, Dept of Fixed Income

Slide 13

india _global market  
india _global market  

macro economic environment

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