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FM says ample liquidity in system, fiscal deficit in line

Last Updated: Friday, December 11, 2009 - 22:36

New Delhi: The government on Friday said the 65
per cent rise in its borrowings this fiscal would not affect
affect resources for the private sector.

"Despite higher market borrowing of the government in the
current year, there is ample liquidity in the system," Finance
Minister Pranab Mukherjee said while replying to a discussion
on the first batch of supplementary demands for grants in the
Lok Sabha here.
The fiscal deficit, Mukherjee said would be within the
6.8 per cent projected level of the GDP.

"With the prevailing trends in receipts and expenditure,
coupled with better than expected performance of the economy
during the second quarter of 2009-10, it is expected that the
fiscal deficit will remain within the estimate of 6.8 per cent
presented in the Budget in July 2009," Mukherjee said.

The Reserve Bank has been absorbing around Rs 1,16,000
crore per day, on average, in the current fiscal year up to
December 7, 2009 through reverse repo transactions.

Even though the gross borrowings have increased by about
65 per cent over last year`s actuals, this has been carried
out in a non-disruptive manner, Mukherjee said.
The government borrowings were front loaded in the first
half of the fiscal year, to ensure that there was adequate
space for the private sector in the second half, when their
demand would pick up, he said.

The weighted average cost of borrowings is also lower at
7.19 per cent against 8.51 per cent in the corresponding
period of the previous fiscal, the minister said.

Due to the stimulus packages have hit the exchequer and
increased the government expenditure widening the fiscal
deficit. The governmnet has projected that fiscal deficit will
rise to 6.8 per cent in 2009-10.


First Published: Friday, December 11, 2009 - 22:36
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