Overdrafts by States rising -- RBI

Overdrafts by States rising -- RBI
ENS ECONOMIC BUREAU

MUMBAI, APR 27: The Reserve Bank of India's report on macroeconomic and monetary developments in 1999-2000 clearly reveals the worsening fiscal position of States and Union Territories in India. The outstanding level of ways and means advances (WMA) and overdrafts of States from the RBI increased from Rs 4,818 crore as on March 31, 1999, to Rs 7,519 crore in March 31, 2000, which included an overdraft of Rs 4,092 crore.

``Several states faced financial difficulties and they frequently resorted to WMA and overdrafts from RBI despite the recent enhancement in WMA limits to state governments to Rs 3,685 crore from Rs 2,234.4 crore,'' the central bank said in its `Macroeconomic and Monetary Developments in 1999-2000' report released here today.

On the other hand, the gross fiscal deficit (excluding the states and Union territories) increased from the budgeted Rs 79,955 crore to Rs 1,08,898 crore in the revised estimates. ``Almost all key fiscal indicators such as the primary deficit, revenue deficit, debt to gross domestic product ratio and interest payments to GDP ratio witnessed a deterioration in 1999-2000,'' the RBI said.

Referring to the Centre's market borrowing programme of Rs 1,77,704 crore in 2000-01, it said ``raising this order would pose a challenge. Union budget placed the net market borrowing at Rs 76,383 crore for 2000-01, but together with repayment of maturing loans and 364-day treasury bill, the gross borrowing requirement works out to Rs 1,17,704 crore as against Rs 99,630 crore in 1999-2000.''

The fiscal situation in 1999-2000 proved to be difficult, partly because of cyclical, unforeseen and security related factors, the RBI said adding, ``net revenue collection of the central government fell short of the budgeted target by Rs 3,336 crore while proceeds from disinvestment declined from the budgeted level of Rs 10,000 crore to Rs 2,600 crore in revised estimates.''

The revenue shortfall was exacerbated by pressures from the unanticipated increase in defence expenditure, relief expenditure to cyclone affected Orissa, elections, fifth pay commission and higher level of fiscal assistance to states, the RBI survey said. Referring to the interest rate, the report said, it was necessary to ensure that conditions remain favourable to industrial recovery and that liquidity conditions do not give rise to adverse inflationary expectations.

The RBI report points to the deteriorating fiscal deficit, while patting itself on the back for having managed the Government's market borrowing programme efficiently. During 1999-2000, the government's gross market borrowings through dated securities amounted to Rs 86,630 crore, compared with Rs 83,753 crore in 1998-99. Including the fresh issue of 364-day T-bills, the gross market borrowing of the Centre rose to Rs 99,630 crore from Rs 93,953 crore in the previous year.

Scheduled commercial banks' investment in government securities increased by Rs 54,612 crore in 1999-2000 against Rs 36,261 crore during 1998-99. Currently, scheduled commercial banks are holding above Rs 80,000 crore of government and other approved securities in excess of the minimum statutory requirement.

As part of the strategy to elongate the maturity profile of marketable debt, 65 per cent of the government borrowing was raised through bonds with maturity over 10 years. All borrowings in 1999-2000 were above 5-year maturity. There has been a turnaround in the falling trend of the share of long-term bonds in the total marketable debt of the Government in 1999-2000.