Economy - Government raises borrowing target for FY12 n Emkay

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Economy

Government raises borrowing target for FY12

n     The Government has announced for an additional borrowing programme to the tune of Rs528bn or 13% of the FY12 fiscal deficit. However, fiscal deficit target has been kept unchanged at 4.6% of GDP

n     GoI attributed higher additional borrowing to net outflow from smaller savings schemes and lower cash balances. It now expects a shortfall of Rs350bn in small savings for FY12

n     With 47% of FY12 borrowing in H2 and deficit liquidity, we believe there could be some crowding out of private borrowings

n     Additional borrowing along with any further increase in interest rates could put pressure on the yield curve. Expect the longer yield curve (10-yr Gsec currently quoting at 8.44% levels) to inch-upwards of 8.6% levels