Bloomberg News

India Will Review This Year’s Budget Deficit Goal, Gopalan Says

November 09, 2011

Nov. 9 (Bloomberg) -- India will review its budget-deficit target for the fiscal year through March, a finance ministry official said as slowing economic growth hurts tax revenue.

“We will review the deficit target when we present the mid-year economic review to parliament in December,” R. Gopalan, secretary of economic affairs in the finance ministry, told reporters in New Delhi today.

India’s 10-year bond yields today jumped the most this month on concern the sale of special bills used to meet temporary mismatches in cash flow signals the government’s fiscal situation is worsening. Finance Minister Pranab Mukherjee last month said it would be a “challenge” to narrow the government’s budget deficit to a four-year low of 4.6 percent of gross domestic product by the end of March.

A higher deficit “is likely to maintain an upward pressure on bond yields,” said Nagaraj Kulkarni, a Mumbai-based fixed- income strategist at Standard Chartered Plc. “There is a high possibility of fiscal slippage this year.” He expects the deficit to widen to 5.4 percent of GDP by March 31.

The yield on the 8.79 percent security due November 2021 climbed seven basis points, or 0.07 percentage point, to 8.92 percent as of 1:42 p.m. in Mumbai. The yield earlier rose by eight basis points to 8.93 percent, the biggest daily increase for a benchmark 10-year bond since Oct. 28.

The finance ministry will auction 90 billion rupees ($1.8 billion) of 42-day cash-management bills today, the central bank said in a statement yesterday. It sold 60 billion rupees of similar-maturity cash-management bills yesterday.

India’s budget deficit in the six months through September was 68 percent of the annual goal, according to a report by the Controller General of Accounts. Revenue collections were 38.7 percent of the full year target in the six months through September compared with 58.4 percent of the annual target in the same period last year, the report showed.

India’s economy may grow 7.6 percent this fiscal year, the Reserve Bank of India said last month, reducing its estimate from 8 percent predicted earlier.

--Editors: Cherian Thomas, Mark Williams

To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net


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