Weeks before global rating agencies decide on Indias sovereign rating,the finance ministry will administer a positive dose to the economy. Despite a flagging monsoon and slowing public investment,the ministry will not ask Parliament for more funds than what has been sanctioned in the budget.
This is likely to free up credit to the corporate sector at lower interest rates,and give the clearest signal yet of Indias determination to cut back on fiscal deficit.
Theres no decision yet,but the thinking is that we can manage without additional funds. If funds are required,it will be put up in the winter session (of Parliament), a senior finance ministry official said.
Consequently,the finance ministry has not issued a budget circular to ministries listing conditions for sanction of extra funds through the first supplementary demand for grants. The directives are usually issued at least a month in advance. The approval process,which includes clearance from the President,is often as painstaking as the annual budget itself.
Prime Minister Manmohan Singhs decision underscores the governments determination to find money by cutting the subsidy bill of Rs 1.79 lakh crore and raise funds from the auction of telecom spectrum. It also gives a clear commitment to the markets that the Centres borrowing target for this fiscal will not change for the worse.
In 2011-12,the first supplementary demand for grants had involved an additional expenditure of Rs 34,724.50 crore with a net cash outgo of Rs 9,016.06 crore. In 2010-11,the demand was larger additional expenditure of Rs 68,294 crore with a net cash outgo of 54,589 crore.