New Delhi,Nov 18 () : The fiscal deficit being contained to 5.3% of GDP as planned by FM P Chidambaram would not be possible after the 2G auction failure.
The Government was banking on around $400 billion from the auction but the target fell by 75%. This has upset the FM’s calculation but he has put a brave front saying that yet another auction would be conducted in March after the TRAI comes up with new base rates.
Due to tax earnings being not on target and the subsidy bill being high, Chidambaram revised the fiscal from 5.1-5.3%. There is also a threat to downgrade India to junk status if the reforms do not produce results.
On the political front, the BJP-TMC-Left seem to disrupt the passage of bills.
The 3G auction fetched $12 billion in 2010 due to which the fiscal deficit was 4.7%. Based on this, the FM fixed an over optimistic figure of $400 billion. With a rise in 0.1% in deficit. the Government has to borrow one trillion rupees and in February it would have to borrow Rs 5.7 trillion since it would be 5.6% of the GDP.
CDMA sector saw no takers as Tata Teleservices and Videocon dropped out. Mumbai, New Delhi and Kolkata saw no takers due to high prices.
RBI is not in a mood to cut interest rates even though the inflation dropped to 7.5% last month. It has indicated that if the economy improves in first quarter of 2013 then it may cut rates which means the earliest in January.
FM P Chidambaram is looking for growth to pick up in third and fourth quarter of 2012-2013. Last week, the foreign exchange reserve which stood at $294 billion dropped to $293 billion.
Share markets fell for the sixth day on Friday with banks like ICICI bank stocks getting hit on reports that the coming Parliament session will be a washout.