Union Budget 2011: India's FY12 borrowing not a challenge: RBI

MUMBAI: The Reserve Bank of India (RBI) does not see any challenge in managing the borrowing programme for fiscal year 2011/12, a deputy governor said, after the government unveiled a lower-than-expected borrowing figure in its federal budget. "In the aggregate sense, as a reflection or as a per centage of the overall credit growth, overall deposit growth and so on, this (borrowing) does not pose too much of a challenge in our estimate in terms of managing," the Reserve Bank of India's Deputy Govenor Subir Gokarn told reporters on Monday. The government plans to borrow a gross 4.17 trillion rupees ($92 billion) in 2011/12, which would mean a net borrowing of 3.43 trillion rupees.  New Delhi's bond issuances in the next fiscal that starts April 1 had been forecast at 4.50 trillion rupees on a gross basis, and 3.77 trillion on a net basis, according to a Reuters poll, last week. The yield on the most-traded 8.13 per cent 2022 bond ended at 8.09 per cent, off the day's low of 8.05 per cent, but down 4 basis points from Friday. Gokarn added that liquidity situation should be less volatile in 2011/12 than the current year in the absence of any one-off gains in the next fiscal. The government had a windfall gain of 1.06 trillion rupees through telecom spectrum auction in first half of 2010/11, which had resulted in a sharp tightness in banking system liquidity. Banks, which had surplus funds in the first half, ended up borrowing more than 1 trillion rupees from the RBI in the second half due to the government's inability to expedite spending of its spectrum proceeds. Gokarn said the fiscal deficit target of 4.6 per cent of the gross domestic product would help provide some relief in terms of the macro-economic impact of the fiscal position. The government expects the deficit to be at 5.1 per cent in the current fiscal. "We have been saying the more expanded the fiscal position, the more pressure it puts on demand and, therefore, the more difficult it is to manage the inflation situation, the inflationary pressures coming from the demand side," Gokarn said. "This reduction in the deficit gives us some comfort that the correction is happening and it's happening significantly," he added.