The fiscal position of the Union government continues to be under strain, with its recourse to ways and means advances from the Reserve Bank of India touching Rs 10,594 crore as on May 1 despite the government raising Rs 17,000 crore till that date.
Since then, the government has auctioned a six-year paper and raised Rs 4,000 crore.
Considering that the proceeds of the six-year issue, which hit the market on May 8, could be used to bring down the WMA balance, the WMA figure would still stand at Rs 6,594 crore. This is around Rs 1,700 crore less than the 75 per cent limit, which automatically triggers a fresh flotation of securities.
However, the present market sentiment, in the aftermath of the imposition of sanctions and the rupee fall, is not expected to be conducive for the government to come to the market. A private placement with the RBI this time is not ruled out. But a cause for concern is that the monetised deficit has been budgeted at Rs 7,000 crore for the year and the government has already placed Rs 5,000 crore worth of securites with RBI last month.
This is the second time in the current fiscal that the WMA has overshot the 75 per cent limit of Rs 11,000 crore which is the ceiling for the first half of the year. The government had drawn Rs 8,231 crore within the first three days of the new fiscal and this increased to Rs 10,463 crore by April 10. The government had then privately placed Rs 5,000 crore with the RBI towards the end of April to reduce the WMA balance, which came down to Rs 8,224 crore on April 24.
Thus, it appears rather difficult for the government to stick to its moentised deficit estimate of Rs 7,000 crore for the year.
It could, in the forthcoming budget, curtail its expenditure or revise its monetised deficit target for the year.
