Higher dependence on market borrowings by Govt worrisome: RBI
The Centre has twice revised its borrowings target in the H2 of FY12, leading to over Rs 92,000 crore of excess borrowings over and above the budgeted Rs 4.2 lakh crore.
Flagging the issue of growing fiscal deficit, the Reserve Bank today said that higher dependence on market borrowings by the Government was "worrisome" and called for fiscal prudence.
"Tighter adherence to fiscal rules (is) necessary as increasing dependence on market borrowings is worrisome," the RBI said in its macroeconomic and monetary developments review released on the eve of monetary policy announcement.
The Centre has twice revised its borrowings target in the H2 of FY12, leading to over Rs 92,000 crore of excess borrowings over and above the budgeted Rs 4.2 lakh crore.
This has put a severe strain on the budgeted fiscal deficit estimate of 4.6 per cent with even the Finance Minister admitting that meeting the target will be difficult.
The RBI said the Government has been borrowing from the open market through Ways and Means Advances due to lesser accumulation in the National Small Savings Fund.
The increased Government borrowing, along with rate hikes, has had an impact on liquidity conditions and the apex apex said it had to resort to buy back of Rs 61,400 crore of Government securities in what it terms as open market operations (OMO) to inject liquidity in the system.
RBI also made it clear that though the OMO is the instrument of choice, it can resort to adopting other measures to infuse liquidity "as and when required".