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| Govt borrowing likely to spiral in H1: Rangarajan |
| BS Reporter / Kolkata Mar 13, 2010, 00:46 IST |
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Like the last financial year, the government is likely to frontload its borrowings during the first half of the next fiscal, according to C Rangarajan, Chairman, Prime Minister's Economic Advisory Council. “Usually since in the second half of the year there is a credit demand in the industry, they (government) will do a greater part of the borrowing in the first half of the year,” Rangarajan said on the sidelines of an interactive session by the Calcutta Chamber of Commerce.
For the next fiscal, the net market borrowing by the government is pegged at Rs 3.45 lakh crore, according to the 2010-11 Union Budget. Rangarajan further said the economy was expected to grow at 7.2 per cent in the current fiscal, and the last quarter GDP growth was likely to be in the range of 8-9 per cent. While the rate of agricultural growth might decline by 0.20 per cent, industrial sector should grow at 8.6 per cent, and the services sector at 8.7 per cent in the 2009-10 fiscal, he said. For the current year, the total exports were estimated to be about $168 billion, while the import bill was estimated at $297 billion, he said.
“Thus, the overall current account deficit was expected to be $29.50 billion, which would be 2.2 per cent of the GDP, which is manageable. The capital flow from the foreign direct investment, foreign institutional investment and external commercial borrowings will be enough not only to cover the current account deficit but also to move to the reserve,” he added. The total FDI flow to the country was expected to be $20 billion, and the FII flow to be $27 billion. Rangarajan said.
Food inflation
Food prices were likely to start coming down in the next two months, with the food inflation expected falling at 6 per cent in the second half of the 2010-11 financial year, Rangarajan said. The annual rate of inflation for food index declined marginally at 17.81 per cent for the week ended February 27, 2010, against 17.87 per cent in the previous week. “The food price inflation is a matter of serious concern, but the favorable factor is the high stock for public distribution system. We have 25.65 million tonne of rice, and 16.28 million tonne of wheat in reserve,” he said.
There should be an additional channel, apart from the regular PDS, so that the reserve food grain stock was available to the non-BPL families, he further said. To meet the demand there might not be any need to import rice, as so far rice procurement had been to the tune of 24 million tonne. “If the procurement of rice had fallen below 27 million tonne, then the government might have required to import rice,” said Rangarajan. Even though the overall deficiency in rainfall is 22.70 per cent, the impact of lower rainfall was lower than what it has been earlier.
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