Additional borrowings not to affect fiscal deficit: Mukherjee

The government's decision to borrow an additional Rs52,800 crore from the market in the second half of the fiscal might not have an adverse impact on the fiscal deficit, finance minister Pranab Mukherjee claimed today.

"It is too premature to say that there would be adverse impact on fiscal deficit," Mukherjee told reporters. "We have to borrow Rs53,000 crore to ensure that there is an un-interrupted cash flow. As far as fiscal deficit is concerned, we shall have to consider various other factors."

The government decided to borrow Rs52,800 crore, about 13 per cent more than the budgeted borrowings of Rs4,17,000 crore estimated earlier, to meet its expenditures.

"The additional market borrowing was required due to lower government cash balances and a lower pool of small savings," said R Gopalan, secretary, department of economic affairs.

There was a net outflow of Rs26,000 crore from the small savings pool in the first quarter of the current fiscal, as many individuals preferred to place deposits with banks, since they earn higher returns now. Small savings schemes offer returns of just eight per cent.

But the government's decision saw the yield on the benchmark 7.8 per cent 10-year G-sec rise by 10 basis points to 8.44 per cent. Analysts expect the yield to rise to 10.25 per cent by the end of the year.