Finance Minister Arun Jaitley is under pressure to bring the economy back on track, even if is at the cost of fiscal deficit. However, reports suggest that the Finance Minister is going to stick to fiscal deficit target and may sell bonds to raise funds for extra spending. After the lowest GDP growth of 5.7 per cent in April-June quarter, economists and policy advisors suggested the government to take measures to put the economy back on the growth path. However, for that the government has to spend more and create demands.

India's fiscal deficit at August-end touched 96.1 per cent of the budget estimate for 2017-18, mainly due to rise in expenditure. In absolute terms, the fiscal deficit - difference between expenditure and revenue - was Rs 5.25 lakh crore during April-August, 2017-18, according to the data of Controller General of Accounts (CGA).

During the same period of last financial year, 2016-17, it was 76.4 per cent of the target.

The Finance Minister in February had budgeted to raise 5.8 trillion rupees in 2017-18 through bond sales to bridge the fiscal deficit of 3.2 percent of GDP.

Economic Affairs Secretary Subhash Chandra Garg said that the government would leave the full-year borrowing target intact and sell bonds worth 2.08 trillion rupees between October and March. "We do not foresee extra borrowing at this point in time, but we are conscious there may be a possibility," Garg said after meeting with the RBI officials.

On Thursday, it was reported that the government was also planning to borrow Rs 2.08 lakh crore from the market in the second half of 2017-18. The government, for now, isn't thinking of any relaxation on fiscal deficit as any such move could invite a censure from credit ratings agencies and could also make foreign investors wary.

This week, rupee came down to six-month low. This fall in rupee was attributed to the government's hint of stimulus package of Rs 50000 crore that raised fear among foreign investors who thought that it could be coming at the cost of fiscal deficit. Earlier on September 22, it was reported that the government was thinking of spending Rs 50,000 crore to boost the country's slowing economy. The move was estimated to widen the fiscal deficit for 2017-18 to 3.7 percent of the GDP from a budgeted target of 3.2 percent.

The Reserve Bank of India on Thursday said that it would raise the foreign investment limits for government bonds by 80 billion rupees to 2.5 trillion rupees for the October-December quarter. The central banks' move came after the current quotas were almost fully exhausted amid strong buying by foreign investors.

Economic experts believe that the biggest challenge for the economy is - private investments. The private sector investments are slow. Though government has been trying to do its bit, the fact that the share of government spending in the total capex is just 12 per cent gives little hope that government spending alone would have much of a difference on the ground.



(With inputs from agencies)

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