Goldman Sachs on Monday said India will be able to comfortably finance its historic fiscal deficit (projected at 6.8% of GDP this fiscal) and the country?s net borrowing in the coming fiscal is likely be lower than this year?s.
In the current fiscal, the government?s net borrowing stands at Rs 3.6 lakh crore, while gross borrowing amounts to Rs 4.51 lakh crore. Finance minister Pranab Mukherjee will unveil the Budget on Friday, which will seek to contain fiscal deficit and borrowing targets for 2010/11.
?We think the government will be able to finance its deficit comfortably, due to a lower, above-the-line fiscal deficit and aggressive disinvestment,? reports quoted Goldman Sachs analysts Tushar Poddar and Pranjul Bhandari. There is still room to buy back bonds through open market operations, they said, adding the government will be able to earn at least $12 billion through stake sales in state-run firms over three years. Goldman expects the fiscal deficit to come down by 1 percentage point to 5.3% in 2010/11.
Meanwhile, overseas reports, quoting a Standard and Poor?s analyst, said India?s macro-economic conditions look better compared to a year ago but the government needs to improve both revenue and expenditure. Standard & Poor?s cut its outlook on India?s long-term sovereign credit rating to negative from stable in February 2009. At that time, S&P had retained its BBB-minus long-term sovereign rating for India and its A-3 short-term rating. Both the ratings are at the lowest rung of investment grades.
?Compared to about a year ago when we changed the outlook of India?s BBB-minus ratings to negative, macro-economic conditions look better,? reports said, quoting Standard and Poor?s analyst Takahira Ogawa. However, we need to see the improvement of both revenue and expenditure of the government to reduce its fiscal deficit, the report added.