According to newspaper reports, the government of India is likely to surpass its borrowings target for FY00 by a wide margin. The Reserve Bank of India has announced an issue of Rs 30 bn government paper. With this, the government's gross borrowings will touch Rs 921.3 bn as against the targeted Rs 840.1 bn. The sharp rise in government borrowings is a direct fallout of the burgeoning fiscal deficit. Despite the economy gaining momentum (the GDP grew by 6% in 2QFY00), the government's revenue collections continue to be way below target. Then there is the expenditure on the Kargil conflict that further worsened the fiscal situation. Added to this is a failed attempt to raise Rs 100 bn by divesting the government's stake in various public sector units.
The government's persistent recourse to the debt markets to fund deficits could trigger off a hardening of interest rates as corporate and government compete to meet their funding requirements. This would not augur well for the economy, as higher rates would lead to slower growth in investment activity, which is a must for a sustained economic recovery.
The government has targeted a fiscal deficit of Rs 1,050 bn for the fiscal year 2000. However, this is likely to be exceeded by a wide margin. Consequently, it has been estimated that the government would exceed its borrowing target by approximately Rs 200 bn.
Affordability in the housing segment has never been so good in last one and a half decade. Here's how you could make the most of it...
How I picked an exciting stock using trends from both the commodity and equity markets.
Is too much data hurting your quest for market beating returns?
Ajit Dayal on how the mutual fund industry robs you of your wealth.
If Yes Bank manages to do this, it could be the start of a much-needed turnaround for the bank.
More Views on NewsAjit Dayal on how India's vaccine strategy will impact the markets.
Rather than predicting the market, successful investing is more about preparing well and placing your bets accordingly.
This could take India to the position of 3rd largest economy.
In this video, I'll you what I think is the real reason behind yesterday's market crash.
This ignored sector could deliver big short-term profits.
More
Equitymaster requests your view! Post a comment on "Government debt way past target levels". Click here!
Comments are moderated by Equitymaster, in accordance with the Terms of Use, and may not appear
on this article until they have been reviewed and deemed appropriate for posting.
In the meantime, you may want to share this article with your friends!