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CRR post-script
The release of funds to banks (Rs 8,061 crore) through cuts in their cashreserve ratio (CRR) may not go far in swelling resources to business. Thebanks will have to accommodate the slated expansion in credit to government.Against the budget target of market borrowings (Rs 57,461 crore net), theactual net borrowings effected add up to Rs 57,977 crore; however, againstthe gross borrowing target of Rs 84,014 crore, the actual garnered so far isRs 72,630 crore. This leaves Rs 11,900 crore of repayments due against oldloans maturing this year; new loans equivalent to this amount will have tobe issued this year. Besides, the government's ways and means borrowingslimit with the Reserve Bank gets axed in the second half of the fiscal to Rs7,000 crore. So the Centre will need to float Rs 4,000 crore of new debt.The government's new borrowing is unlikely to be confined to the estimatedRs 15,900 crore. The Centre's net revenue collections (after transfers tothe states) are running behind last year's. And gross fiscal deficit at 60per cent of the budget target currently exceeds the proportion (52 per cent)a year ago; the share of revenue deficit has soared to 70 per cent, up from52 per cent. Getting the gross fiscal deficit back to target will not beeasy, even if the government hacks capital expenditure. Overall, newborrowings are likely to exceed Rs 20,000 crore. So much depends onfulfiling the PSU disinvestment target, improving tax collections andcutting down revenue expenditure. Bank deposits are projected to rise by Rs65,000 crore. (But a shortfall is on the cards). Business will need at leastRs 50,000 crore to sustain industrial growth above 6.7 per cent. Less islikely to be available after lending to government, even after including theCRR releases. It is a tight balance at best. Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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