If Budget 2012-13 is anything to go by, the liquidity pressure in the system is unlikely to ease. And, this is no good news for those who expect the interest rate to come down.
With an estimated fiscal deficit of 5.1 per cent of the GDP, the government has indicated a net market borrowing of Rs.4.79 lakh crore for 2012-13. The gross borrowing is projected at Rs.5.70 lakh crore (including repayments of Rs.90,615.94 crore). For 2011-12, the revised net borrowing is placed at Rs. 4.36 lakh crore, up from the budget estimate of Rs.3.43 lakh crore). Also, the revised gross borrowing for the current fiscal is Rs.5.10 lakh crore against the budget estimate of Rs. 4.17 lakh crore.
The huge government borrowing is bound to have a `crowding effect' and push the cost of funds for Corporate India. Though the opening of ECB window for select crisis-hit sectors such as aviation and power may help to feed partially the fund appetite, observers feel the fiscal deficit-induced borrowing by the government will have a negative repercussion on the overall fund availability.
The total debt stock is pegged at 45.5 per cent of the GDP at the end of 2012-13. Surely, this is no healthy number for a country which is pining to be among the economic superpowers!
Keywords: Union Budget 2012-2013