Government’s total public debt increases by 5.1% at end-June 2013

 

(The gross and net market borrowing requirements of the Government in 2013-14 (BE) at Rs. 5,79,009 crore and Rs. 4,84,000 crore, respectively, showed moderate increase of 3.4% and 3.6% over 2012-13 (RE) levels of Rs. 5,58,000 crore and Rs. 4,67,384 crore, respectively.)

Snapshot of the report on Public Debt Management for April-June 2013

 

Government Finances-- The gross fiscal deficit of the Central Government in budget estimates (BE) 2013-14 was placed at Rs. 5,42,449 crore (4.8% of GDP) as against revised estimates of Rs. 5,20,925 crore (5.2% of GDP) for 2012-13. The gross and net market borrowing requirements of the Government in 2013-14 (BE) at Rs. 5,79,009 crore and Rs. 4,84,000 crore, respectively, showed moderate increase of 3.4% and 3.6% over 2012-13 (RE) levels of Rs. 5,58,000 crore and Rs. 4,67,384 crore, respectively.

 

The fiscal outcome for first quarter of the 2013-14(Apr-June) indicates some deterioration in terms of key deficit indicators as % of budgeted estimates (BE), vis-a-vis their position during the same period of the previous fiscal year, mainly due to lower tax collection as well as increased expenditure. Gross tax collections during the same period showing a moderate growth of 4.2% against a budgeted growth of 19.1%, at 14.3% of BE were lower than 15.8% a year ago. Collections from corporation tax, projected to grow at 16.9%, stood at Rs. 50,728 crore, showing a moderate a growth of 2.7% over Rs. 49,405 crore in the same period of previous fiscal year. Personal income tax collections at Rs. 40,290 crore showed a growth rate of 15.5% against 20.2% projected in BE for 2013-14.

 

Among the major indirect taxes, collections from customs duties showed a marginal growth of 4.9% during April-June 2013 (BE 13.6%), while growth in excise duties was negative at (-) 18.3% (BE 14.9%). Service tax collections increased by 15.9% during the period against 35.8% in the BE. Total expenditure during April-June 2013 at 23% of BE was higher than 20.9% during the same period of previous year.

 

As a result of lower tax collections and increased expenditure, revenue deficit and fiscal deficit during April-June 2013 at 55.4% and 48.4% of BE were higher than 43.6% and 37.1%, respectively, during the same period a year ago. Primary deficit at 117.2% of BE was also higher than 67% during the corresponding period of the previous fiscal year

 

Fiscal outcome April-June 2013                                                           (Rs. Crore)

Source: Ministry of Finance, Govt of India

 

Outstanding Public Debt-- The total public debt (excluding liabilities under the ‘Public Account’) of the Government increased to Rs. 43,20,644 crore at end-June 2013 from Rs. 41,12,187 crore at end-March 2013. This represented a quarter-on-quarter increase of 5.1% compared with an increase of 5.3% in the previous quarter (Q4 of FY13). Internal debt constituted 90.7% of public debt, compared with 91.1% at the end of the previous quarter. Marketable securities (consisting of Rupee denominated dated securities and treasury bills) accounted for 81.7% of total public debt, unchanged from their share at end-March 2013. The outstanding internal debt of the Government at Rs. 39,19,030 crore declined to 37.1% of GDP from 37.4% at end-March 2013.

 

Composition of Public debt

Source: Ministry of Finance, Govt of India

 

In the secondary market, Bond yields eased during the quarter due to policy easing of 25 bps as well as open market order(OMO) purchases by RBI, decline in inflation rate, slowdown in GDP growth rate and global factors. A moderate decline in yields during the month of April was due to lower than expected growth in IIP, decline in inflation rate and anticipation of rate cut by RBI. 10-year yield declined to 7.75% on April 23, 2013 from around 8% in the beginning of the month. A dip in 10-year yield on May 17, 2013 to 7.17% was primarily due to aggressive demand of new 10-year benchmark security. Yields began gradually rising thereafter barring a marginal moderation in the beginning of June. Rise in yields during the month of June, particularly toward the end of month, was mainly triggered by the selling pressure from FIIs on fears of early end of quantitative monetary easing in the United States . 10-year yield reached 7.58% by 26 June 2013. It traded in the range of 7.12-8.01% during Q1 of FY14 and closed at 7.45% at end-June 2013 as compared with previous quarter close of 7.99%.

 

Warm regards,

 

Dr. S P Sharma

Chief Economist