In sombre news on New Year’s eve, government data showed that India’s fiscal deficit — a measure of the amount the government borrows to fund its expenses — touched Rs 5.09 lakh crore during April-November or 94% of the full-year target.
This means that the government will be hard pressed to keep the deficit within the budgeted 4.8% of GDP this financial year, even though finance minister P Chidambaram has said this target is sacrosanct, a “red line” that will not be crossed.
India’s industrial production is also set to remain muted, with latest government data showing that eight infrastructure industries—a group commonly referred to as the ‘core sector’—grew at tepid 1.7% in November, from a heady 5.8% a year ago.
The industries, which include coal, crude oil, steel, cement and electricity that have a weightage of about 38% in the Index of Industrial Production (IIP), grew by 2.5% in April-November, compared to 6.7% in the same period of 2012-13.
This is still better than October 2013, when the eight core sector industries had contracted by 0.6%.
Industrial output, a measure of production across factories, contracted 1.8% in October from 2% in September, indicating how high borrowing rates and flat income growth prompted people to postpone purchases of goods such as cars and televisions.
But there was a silver lining: external debt, at $400.3 billion (including government debt of $77.3 billion) at the end of September was down $9 million from the March-end level.
“Government external debt stood at $77.3 billion, (19.3% of total external debt) at end September 2013 vis-a-vis $81.7 billion (20.4%) at end-March 2013,” the finance ministry said on Tuesday.
The toxic mix of high inflation, low investments and falling rupee could not have come at a worse time for the UPA government, with national elections about four months away.
Business leaders have been demanding a cut in lending costs to spur investments and growth.