The government is expected to raise around Rs 5,000 crore in a fresh round of borrowings from the market. The move comes immediately after the government had completed the current year's borrowing programme with the Rs 2000 crore three-year paper auction on December 23.
The gross borrowing target for the current financial year was Rs 33,000 crore, of which Rs 32,500 crore was raised after the last tranche on December 23. The rest of the amount is expected to be raised through 364-day treasury bills.
In fact, the government has already raised Rs 5,505 through the issue of ad hoc treasury bills immediately after the net issue of ad hocs over March 31, 1996, was brought down to a negative level of Rs 230 crore on December 27. On January 3, the net issue of ad hocs stood at Rs 5,275 crore.
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The rise in ad hocs follows provisions for the oil pool account deficit, a poor reponse to the PSU disinvestment programme and various government departments drawing on their plan allocations.
The immediate recourse to the ad hoc route is a pointer to the fact that the government revenues are not flowing in as expected. Now the government will be forced to enter the market in order to wind down the ad hoc level by March 31, 1997. Finance minister P Chidambaram had stated that the resort to ad hocs will stop after March 31, 1997.
This is in stark contrast to the last fiscal when the government had not completed its borrowing programme till the last week of March.
One of the primary reasons for the growing government borrowing is the expected rise in the fiscal deficit. "The fiscal deficit, which is targeted at 5 per cent of gross domestic product, is likely to cross 5.3 per cent. This new target needs to be met and it can only be done if the government starts borrowing once again,"ICICI Securities