FM says ample liquidity in system, fiscal deficit in line
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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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