Centre's 2005-06 borrowing plan seen at Rs 90,000 cr

The government's market borrowing programme for 2005-06 is likely to be around Rs 88,000-90,000 crore, according to estimates worked out by the Reserve Bank of India.

If these estimates are accepted by the government, then the Centre's borrowing will be marginally less than the actual borrowing of Rs 1,02,000 crore in 2004-05 and substantially less than the original estimate of Rs 1,50,681 crore last year.

Sources added that the estimate for market stabilisation bonds do not matter as it is just an open market operation and the amount does not add either to the deficit or the actual borrowing.

However, the RBI is learnt to have suggested using only treasury bills as part of the market stabilisation scheme in the coming year.

The estimate has been deliberately kept low as the RBI and government feel that demand for liquidity will continue to pour in from credit pick up. Moreover, foreign institutional inflows will be more evenly spread this year going by the trend of rising interest rate globally.

After the completion of the borrowing programme for the current fiscal, the government has already assured the market of a comparatively less borrowing programme as part of its efforts to contain the fiscal deficit in line with its commitment to the Fiscal Responsibility Management Bill.

Gross market borrowing was even lower than the revised estimate of Rs 1,06,000 crore for 2004-05. The Centre completed its borrowing for this fiscal after raising Rs 5,000 crore on February 7 through sale of 17-year government securities offering 8.35 per cent interest rates.

With this auction, the total gross borrowing of the Centre figured at Rs 1,02,000 crore while net borrowing amounted to Rs 45,684 crore.

The gross borrowing for the current fiscal was 24 per cent less than the Rs 1,34,500 crore raised till February first week in the previous fiscal.

According to market analysts, the lower borrowings indicate that fiscal deficit would be reined in within 4.4 per cent of the GDP during 2004-05.

However, international rating agency Standard and Poors' has warned that it will be difficult for the government to rein in 4.4 per cent fiscal deficit, which has raised alarms among market players.