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Updated: November 29, 2013 01:47 IST

Not to cross borrowing limits, mindful of bond yields, says Mayaram

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A file picture of Economic Affairs Secretary Arvind Mayaram at a function organised by FICCI. Photo: Ramesh Sharma.
Business Line A file picture of Economic Affairs Secretary Arvind Mayaram at a function organised by FICCI. Photo: Ramesh Sharma.

The Finance Ministry, on Thursday, reiterated its resolve to stick to the 4.8 per cent fiscal deficit target, saying “it will stick to its borrowing programme but will calibrate debt sales according to the market conditions.”

“The red line on fiscal deficit (of 4.8 per cent) is sacrosanct, and will not be breached. Therefore, we are trying to maximise revenues. We are hopeful that we will be able to reach within the target, and after that, whatever that is required to be saved to within 4.8 per cent, that will be done.”

“I cannot say what estimate (of expenditure cuts) it would be because there’s still another six months left. I’d be able to tell you an estimate around 20th March,” Economic Affairs Secretary Arvind Mayaram said here.

Spiking bond yields

On the spiking bond yields, he said, “we are mindful of what the going yields are, and, therefore, calibrate the borrowing accordingly. It is not that they are fixed at one point. We will continue with what our requirements are. But we will calibrate keeping in mind the market conditions on the day in which we go out,” the senior finance ministry official said.

Mr. Mayaram said he was confident of meeting the divestment target of Rs.40,000 crore, though the government had been able togarner only about Rs.1,150 crore thus far this fiscal.

On his expectation from the forthcoming spectrum sales, Mr. Mayaram said he was bullish.

The government has outlined a total borrowing plan of Rs. 5.79 trillion for the full fiscal year. Out of which, 76 per cent had already been used up. Mr. Mayaram also said the Reserve Bank was expected to switch back to a “more modest” interest rate regime once the investment cycle picked up.

“There is a sense of scepticism in the markets at the moment, possibly because of the uncertainty of the U.S. taper, creating volatility both in currency and capital markets, but the international markets are bullish on the country,” he said.

On growth, he said the government was quite hopeful of better numbers going forward.

“Growth should begin to claw its way out of the depths that it had gone to. We are hopeful that growth will pick up. But I cannot really predict how it would be, but we really hope that the trend continues because we expect that investments which are beginning to happen are because of the clearance of the CCI and other measures taken by the government,” he said.

No urgency

As forex reserves continue to rise to comfortable levels addressing the current account deficit worries and the rupee pains ebbing, Mr. Mayaram said that there was no urgency to include government debt in the global bond indices.

As the rupee came under pressure and forex reserves started depleting on taper worries, confounding the already high CAD worries, the government had asked the Reserve Bank to begin talks to include its debt into benchmark indices compiled by global banks such as JP Morgan, hoping to net billions of dollars.

It would be interesting to be on the global indices, but it was not a matter ``which is emergent or so urgent’’ that it would require an immediate decision,” Mr. Mayaram told reporters on the sidelines of a Crisil summit on corporate bonds.

“Deliberations are going on. The Reserve Bank is fully engaged with this exercise, and we should wait for the outcome of the deliberations. The entire matter is under consideration. It is very difficult to say anything more than that at the moment,” he said.

Earlier addressing the seminar, Mr. Mayaram said the Government was looking at making rupee settlements eligible in Euroclear debt platforms. “We can actually look at Euroclear and similar participation to make the bonds more internationally competitive,” Mr. Mayaram said.

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