FM promises squeeze on borrowings

'Fisc to improve in 2005-06'

Finance Minister P Chidambaram today said the government would try to borrow less in 2005-06 in order to keep fiscal deficit in check.

During 2004-05, the Centre's fiscal deficit was 4.1 per cent of the gross domestic product against a revised estimate of 4.5 per cent. "The fiscal performance was much better last year. We are happy but we have to be cautious to do much better than that," Chidambaram told reporters after launching the Agriculture Insurance Company's (AIC) crop insurance scheme "Varsha Bima" here. The government has budgeted for a fiscal deficit of 4.3 per cent of the GDP during the current fiscal.

"I cannot go back to that Budget target .... So, both by design and by compulsion, we will have to borrow less than indicated. Our overall borrowings (in 2005-06) will be less than indicated (in the Budget)," he said.

The government's net borrowing target for 2005-06 is around Rs 1,10,000 crore. The borrowing in June will, however, be as per schedule. The government is to borrow Rs 10,000 crore through dated securities by June 8. According to the gilt issuance calendar, the government will borrow Rs 5,000 crore between June 16 and 24.

The government expects to spend nearly 1.40 trillion rupees on health, education and rural sectors in the year to March 2006 in line with a election pledge to improve the lot of the poor. The government faces an uphill task in controlling the deficit this year as it has lined up nearly Rs 26,000 crore in new spending.

The new plans had left the government with no option but to press the "pause" button on deficit-cutting even though the government was bound by the fiscal deficit-reduction law to cut the deficit-to-GDP ratio by 0.3 percentage points each year.

Global ratings agencies Standard and Poors' and Fitch said India, which both rate just below investment grade, must improve its stretched finances at the national and the state level for an upgrade.

Meanwhile, on the AIC front, the company plans to bring out exclusive insurance products covering cash crops like tea, rubber and sugarcane this year.

"Once minute details about the proposed schemes are worked out, the tea and rubber insurance scheme will be introduced by July this year," said Suparas Bhandari, CMD of AIC.