Centre continues to rely heavily on WMA

MUMBAI, May 9: The Centre continued to spend indiscriminately for the third successive week in the current fiscal. Despite a private placement of Rs 5,000 crore with the Reserve Bank of India (RBI) on April 24, the Ccentre’s recourse to ways-and-means advances (WMA) — to cover the mismatch between the expenditure and income of the government — remained high at Rs 8,224 crore. This is marginally lower than the 75 per cent limit for the first half, which is pegged at 11,000 crore.

The RBI subsequently held an auction of the Rs 4,000-crore ten-year paper at a coupon of 12 per cent on April 30, which might have brought down the WMA level. But analysts pointed out that the Rs 4,000 crore six-year paper, auctioned on May 8, put to rest any downward movement in the advances. "I guess the RBI’s entry into the market with an auction every week is triggered by the fact that the government has exhausted the 75 per cent limit," an economist with a local brokerage house said.

According to the Reserve Bank’s weeklystatistical supplement, released on Saturday, the WMA fell from Rs 9,411 crore on April 17 to Rs 8,224 crore on April 24. "The marginal fall might be owing to the private placement, but it seems the government continued to borrow in a big way through the WMA," the economist said. Despite a Rs 5,000-crore private placement with the RBI, the advances during the week fell only by Rs 1,187 crore.

The central bank’s forex reserves went up by $ 124 million for the week ended, April 30, to touch $ 29.45 billion. The increase was primarily because of a rise in gold reserves, which went up by $ 126 million. Foreign-currency assets, however, declined marginally by $ 2 million. Bank credit declined 1.1 per cent during the week ended April 24. Deposits continued to show a rise and during the fortnight ended April 24, it went up by 0.1 per cent.