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Centre's fiscal consolidation suffered setback in 1997-98

The Centre did not resort to Ways and Means Advances during the major part of fiscal year 1997-98 on account of good money market support to the government's borrowing programme.

Disclosing this, the Reserve Bank of India's Report on Currency and Finance for 1997-98 said that the Central government had availed of WMA in the last quarter of 1997-98 and the amounts availed were within the stipulated limits.

The Centre had discontinued the issuance of ad hoc treasury bills in the Union budget of 1997 and a system of WMA was introduced to meet the temporary mismatches in receipts and expenditure of the Central government.

For the fiscal year 1997-98, the WMA limit for the first half was set at Rs 120 billion (April-September) and Rs 80 billion for the second half (October-March). The report says that the outstanding WMA at end-March 1998 was Rs 20 billion.

The report says that the process of fiscal consolidation suffered a major setback during 1997-98, as the fiscal deficit touched 6.1 per cent of gross domestic product (Rs 863.45 billion) as against the budget estimates of 4.5 per cent (Rs 654.54 billion).

Revenue deficit at Rs 436.86 billion (3.1 per cent of GDP) exceeded the target of Rs 302.66 billion (2.1 per cent of GDP). The primary surplus of Rs 25.46 billion (0.2 per cent of GDP) envisaged in the budget estimates turned into a deficit of Rs 206.45 billion (1.5 per cent of GDP).

The monetary effects of the deteriorating fiscal situation were reflected in the monetised deficit, which sharply rose to Rs 129.14 billion (0.9 per cent of GDP) in end-March 1998 from Rs 19.34 billion (0.2 per cent of GDP) in 1997. There were sharp fluctuations in the level of net RBI credit during the year with the monetised deficit turning negative during the second and third quarters, averaging to Rs 74.95 billion during the fourth quarter.

UNI

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