oppn parties Fiscal Deficit, Extra Borrowings and GDP

News Snippets

  • All 6 Bahujan Samaj Party MLAs merge with the Congress in Rajasthan
  • Bengal CM Mamata Banerjee to meet PM Modi on Wednesday, state issues on the agenda
  • Pakistan to open Kartarpur corridor on Nov 9
  • Rajeev Kumar, ex-police commissioner of Kolkata and wanted for questioning in the Sarada scam does not appear before the CBI despite the state administration requesting him to do so
  • Supreme Court asks the Centre to restore normalcy in J&K but keeping national interest in mind
  • As Trump accepts the invitation to attend a programme in Houston with PM Modi, India rushes to settle trade issues with US
  • After drone attack on Aramco's Suadi Arabia facility, oil prices jump 19% in intra-day trading causing worries for India
  • Imran Khan raises nuclear war bogey again, says if Pakistan loses a conventional war, it might fight till the end with its nuclear arsenal
  • Searching for Rajeev Kumar, ex-CP, Kolkata Police, the CBI approaches state DGP to know about his whereabouts
  • Ferry overturns in the river Godavari in Andhra. 46 feared dead
  • Supreme Court to hear pleas on Jammu & Kashmir today
  • Ghulam Nabi Azad moves Supreme Court for ordering the government to allow him to visit his family in J&K
  • GST Council meeting to focus on leakages and evasions, expected to tighten processes, especially regarding input tax credit
  • Finance minister, citing figures for July 2019, says that industrial production and fixed investment is showing signs of revival
  • Amit Shah's comment on Hindi as the unifying language draws the ire of MK Stalin and Siddaramaiah. Stalin says the country is India not Hindia
Sunni Wakf Board and Nirvani Akhara write to the Supreme Court for a negotiated settlement to the Ayodhya dispute
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Fiscal Deficit, Extra Borrowings and GDP

By Sunil Garodia

About the Author

Sunil Garodia Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator. Writes for a number of publications.
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.