India government seeks parliamentary approval for more spending
NEW DELHI (Reuters) - India sought to spend an extra 308.4 billion rupees ($5.70 billion) in the current fiscal year ending March 2013, as expected, to meet its upwardly revised fiscal deficit estimate though it assured there will be no extra borrowing.
However, market participants expect the fiscal deficit to rise above the government's new target of 5.3 percent of GDP due to sluggish revenue collection from its telecom auction and divestments which could force the government to borrow more.
"The extra borrowing is not a function of only the increase in spending, but also of revenues shaping up," said A. Prasanna, economist at ICICI Securities Primary Dealership.
"There is still a possibility of additional borrowing, whether it is through T-bills, or dated securities, we need to see. The earliest we could know will be in the last week of December when they announce the calendar for T-bills auction."
Most economists expect the government to end the fiscal year with a fiscal deficit of 5.6-5.8 percent which could mean an additional borrowing of 300-500 billion rupees.
The government has said it will borrow 5.7 trillion rupees through federal government securities in 2012-13 ending March.
"We don't think at the moment there is a need to borrow anything more than what has been indicated," India's Finance Minister P. Chidambaram told reporters after seeking approval from parliament for the additional spend.
India's fiscal deficit is the widest among many emerging economies due to huge subsidy-based spending.
Ratings agency Fitch warned on Monday it could cut India's sovereign rating if the government loosens fiscal policy in the run-up to the election, due by 2014, or sees a more prolonged slowdown in economic growth.
The fiscal deficit during the April-October period rose to 3.68 trillion rupees ($67.5 billion), or 71.6 percent of the budgeted fiscal year 2012/13 target. ($1 = 54.0950 Indian rupees)
(Reporting by Manoj Kumar, additional reporting by Neha Dasgupta; Writing by Suvashree Dey Choudhury; Editing by Jacqueline Wong)
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