RBI’s stance on rate hike in focus
The government will borrow Rs 2.9 lakh crore (about $64 billion) in the first half of 2010-11, about 63 per cent of the total budgeted borrowing requirements for the year.india Updated: Mar 29, 2010 23:38 IST
The government will borrow Rs 2.9 lakh crore (about $64 billion) in the first half of 2010-11, about 63 per cent of the total budgeted borrowing requirements for the year.
Economists said the Reserve Bank of India (RBI) will have to do a balancing act to keep interest rates low and also make enough money available in the system to help the government finance its deficit during 2010-11. There is also the fear that the sheer size of government borrowings will push up interest rates as demand picks up.
“In the first half of this year (2009-10), 73 per cent of the total borrowing was mopped up. So, in the first half of the next fiscal, it is slightly on the lower side,” Finance Secretary Ashok Chawla said after a meeting with RBI officials on Monday.
“We expect, based on the inflow and outflow trends in the economy, that corporates and institutions will have good access to external commercial borrowings,” Chawla said.
Abheek Barua, chief economist, HDFC Bank said the government’s borrowing programme for the first half is lower than expected, which has provided temporary relief to the markets.
“But if the government borrowing is lower in the first half, it would increase in the second half, which is when the cumulative impact of the RBI’s monetary policy will also pan out,” Barua told HT.
Less than a fortnight ago, the RBI had raised the repo rate, making it costlier for banks to borrow.
Saugata Bhattacharya, vice-president, business and economic research, Axis Bank said the borrowing programme was “more or less” on expected lines. “There is no major concern as private borrowing would pick up in the second half,” he said.