The central government is unlikely to buy back more gilts to pump cash in the money market as Reserve Bank of India has many instruments to manage the tight liquidity situation, a finance ministry official said on Thursday.
The official also expects borrowing to go through smoothly in the rest of months of the fiscal without any change in the size.
?We are confident the government?s borrowing programme for the rest of the financial year will go through smoothly,? the official said. ?RBI has many instruments to see that (smooth borrowing),? the official said.
Government is banking on RBI to manage current liquidity crunch as it has no space for cutting its own borrowing or even postponing any of the weekly bond auctions. Last week, government presented Rs 1,9800 crore extra spending plan in Parliament. But this spending may be met from higher revenues and stake sale in state-run firms.
Government has to borrow Rs 1.63 lakh crore between October and early February. In September, government decided to cut its gross borrowing size for 2010-11 (April-March) by Rs 10,000 crore to Rs 4.57 lakh crore on the back of a bonanza Rs 1.06 lakh crore earnings from telecom spectrum sale and robust inflows from taxes and share sale of state-owned firms.But government spending has not been robust, which coupled with strong credit demand have squeezed liquidity of banks in recent months. Acute cash shortage prompted RBI to extend the second liquidity adjustment facility until end of December, buy back gilts through OMOs.