JOIN USAhead of the Reserve Bank of India’s monetary policy on March 19, the government gave enough proof of fiscal consolidation measures taken by it and expressed hope that Governor D Subbarao will look into them before deciding policy rates.
“The government has walked the talk on fiscal consolidation path and now it is upon RBI to take a call. The RBI, I am sure, will take into account the overall economic situation and what happens between now and March 19,” Finance Minister P Chidambaram said after the post-Budget meeting with RBI Board.
The government has restricted the fiscal deficit at 5.3 per cent for the current fiscal, a promise that Chidambaram had made soon after taking over as Finance Minister. The RBI had earlier said that it would closely look at this number at the time of the monetary policy review.
The minister said that the government’s borrowing figures, kept at a reasonably low level for the fiscal year 2013-14, are also an indication of fiscal prudence path being followed strictly.
Gross borrowing
The government has kept the gross borrowing for the next year pegged at Rs 5.79 lakh crore, which is just Rs 10,000 crore more than this year.
“In terms of gross borrowing we will borrow only Rs 10,000 crore more than this year. In terms of net borrowing, we will borrow only Rs 5,000 crore more,” he said.
Lesser government borrowing is expected to give the private sector enough space to access the market.
Analysts expect the RBI may lower its benchmark rates in its mid-quarter policy review on March 19 as inflation has considerably eased in the past months, but the economic growth has taken a hit.
The industrial production and wholesale price inflation data next week will also be keenly watched by the bank before deciding on rate cut.
The Reserve Bank of India had lowered the key interest rate by 25 bps on January 29. Nevertheless, the pressure is on to reduce it further with a view to arrest decline in growth.