oppn parties Fiscal Deficit, Extra Borrowings and GDP

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  • Supreme Court stays Karnataka HC order blocking operations of Kannada news channel Power TV. Says right to free speech must be "zealously protected" by courts
  • Opposition slams Centre for Samvidhan Hatya Diwas, says the Constitution is being murdered on daily basis under the present BJP government
  • Centre notifies June 25 as 'Samvidhan Hatya Diwas'. This was the date on which Indira Gandhi imposed the Emergency in 1975
  • Bengal moves SC against state governor for keeping 8 bills pending
  • Mamata Banerjee meets Uddhav Thackeray in Mumbai, says 'khela on' and promises to campaign for his party in the Maharashtra assembly elections
  • Stars and eminent persons from across the globe attend the wedding of Anant Ambani with Radhika Merchant at the Jio World Convention Centre in Mumbai
  • Controversial IAS trainee Puja Khedkar faces dismissal from service if her quato and disability claims are found false
  • SC says stay on bail should be in rare cases like terrorism or where order is perverse otherwise personal liberty and Article 21 will go for a toss
  • Supreme Court says judicial review of arrests by ED is necessary to check improper exrecise of power to arrest
  • Supreme Court grants interim bail to Arvind Kejriwal in the money laundering case in Delhi liquor policy case but he will remain in jail as he is under CBI detention in the corruption case in the same scam
  • Retail inflation rises to 5.1% in June, the highest in 4 months
  • Government to avoid merger of BSNL-MTNL. Instead, MTNL's operations will be shifted to BSNL to give the latter an all-India presence
  • Women's U-19 Asia Cup: India to clash with Pakistan on July 19
  • Paris Olympics badminton draws: P V Sindhu in easy group but gets a tough draw later while H S Prannoy and Lakshya Sen might clash in pre-quarter finals
  • After two consecutive wins, India look to seal series when they meet Zimbabwe in the 4th T20 today
BJP and allies win all 9 seats they contested in the Maharashtra Legislative Council poll
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Fiscal Deficit, Extra Borrowings and GDP

By Sunil Garodia
First publised on 2017-12-28 12:12:02

About the Author

Sunil Garodia Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator.
The government has decided to borrow Rs 50000cr via the G-Sec market in the remainder of the fiscal year. This obviously means that fiscal deficit (FD) targets are not being kept in check and the target of fiscal deficit of 3.2 of GDP this fiscal is under stress. The last time the government did this was when it borrowed Rs 90000cr in FY12 and then the fiscal deficit target was revised from 4.6 to 5.9% of the GDP. This year, the additional money that the government is seeking to borrow will take the deficit to around 3.5% of the GDP which is within the FRBM norms.

Why this urgent need to borrow funds and why choose the G-Sec route? Let us take the second question first. Experts have pointed out that the government could have drawn its surplus balance with the Reserve Bank instead of borrowing in an already nervous G-Sec market. Other experts believe that this borrowing is the result of fiscal slippages on account of shortfall in RBI dividend and revenue loss in excise due to implementation of GST. That more or less answers the first question.

Then there is the question of economic slowdown. Bank credit is hovering around negative figures and industries are saddled with surplus capacity. Consumption is not rising as households are stressed due to food inflation and rising healthcare and education costs. Revenue collections have fallen due to GST rate cuts. State finances are already in severe disarray. In such a scenario, Central government spending has to increase to give a push to the GDP. The government had shown exemplary restraint in the last three years and had adhered to FD targets. If the current deviance is not made a habit then it is not such a bad deal and might in fact be good in the long run.