Finance Minister P Chidambaram is likely to
announce net borrowing of nearly Rs 5.18 lakh crore to rein in fiscal
deficit at the stated 4.8 percent levels for FY'14 in the Union Budget
on Thursday, Bank of America-Merrill Lynch (BofA-ML) said in a report
today.
"We expect Chidambaram to project Rs 5.175 trillion (lakh crore) market borrowing, with a fiscal deficit target of 4.8 percent of GDP," BofA-ML India Economist Indranil Sen Gupta said.
Chidambaram's predecessor Pranab Mukherjee had last year presented a plan to borrow a net of Rs 4.79 lakh crore, with a fiscal deficit target of 5.1 percent. Chidambaram has scaled up the target a bit to 5.3 percent for this fiscal.
BofA-ML expects the total net borrowing inclusive of the states' requirements to touch Rs 7.075 lakh crore, the report said.
Of the estimated gross borrowing target, banks will pick up about Rs 3 lakh crore, while other market players will take another Rs 2.4 lakh crore, the US brokerage said. It added that the RBI will have to help raise the remainder Rs 1.675 lakh crore through its bond buyback or open market operations.
After assuming for a 0.50 percent cut in the cash reserve ratio, the report estimated that the RBI will have to inject Rs 1.99 lakh crore of reserve money to fund the current level of credit growth of 16.5 percent. In the first half of this fiscal, the government had got Parliamentary nod to borrow an additional Rs 30,000 crore. But last week, on the back of cutting budgeted expenditure by almost Rs 93,000 crore, the government cancelled a bond issue of Rs 12,000 crore.
"We expect Chidambaram to project Rs 5.175 trillion (lakh crore) market borrowing, with a fiscal deficit target of 4.8 percent of GDP," BofA-ML India Economist Indranil Sen Gupta said.
Chidambaram's predecessor Pranab Mukherjee had last year presented a plan to borrow a net of Rs 4.79 lakh crore, with a fiscal deficit target of 5.1 percent. Chidambaram has scaled up the target a bit to 5.3 percent for this fiscal.
BofA-ML expects the total net borrowing inclusive of the states' requirements to touch Rs 7.075 lakh crore, the report said.
Of the estimated gross borrowing target, banks will pick up about Rs 3 lakh crore, while other market players will take another Rs 2.4 lakh crore, the US brokerage said. It added that the RBI will have to help raise the remainder Rs 1.675 lakh crore through its bond buyback or open market operations.
After assuming for a 0.50 percent cut in the cash reserve ratio, the report estimated that the RBI will have to inject Rs 1.99 lakh crore of reserve money to fund the current level of credit growth of 16.5 percent. In the first half of this fiscal, the government had got Parliamentary nod to borrow an additional Rs 30,000 crore. But last week, on the back of cutting budgeted expenditure by almost Rs 93,000 crore, the government cancelled a bond issue of Rs 12,000 crore.
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