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Government defers Rs 15,000 crore bond issue to contain fiscal deficit – The Economic Times

NEW DELHI: The government’s cash register is ringing again, raising the hope that the fiscal slide would have begun to get arrested in December and the government would achieve its fiscal deficit target for the year. The finance ministry on Wednesday deferred a planned Rs 15,000-crore bond auction to raise funds in view of its comfortable cash position because of robust direct tax collections in December and anticipation of large dividend flows. The government’s fiscal deficit touched 94% of the budgeted estimate at the end of November as revenue slowed, but December should mark the beginning of a correction. Finance minister P Chidambaram on Wednesday again reiterated his commitment to contain the fiscal deficit at 4.8% of gross domestic product . The postponement of the borrowing indicates that the government may be confident about containing the fiscal deficit at the targeted level, said Sunil Sinha, director, public finance, India Ratings. The government added Rs 1.05 lakh crore to its net direct tax collections in December. Even after setting aside the states’ share in the collections, which will leave more than Rs 70,000 crore just from direct taxes for the government. Add to that, more than Rs 25,000 crore of indirect tax collections and the government should comfortably exceed the recent run rate on spending, which has fallen drastically because of a squeeze applied by the finance ministry. The total government spending in November was Rs 99,186 crore, a 12-month low. It’s likely to have fallen even further in December, which should leave the government with a good cushion. Also, the Centre will get nearly Rs 20,000 crore from Coal India in the form of dividends and dividend distribution tax. The record date for the dividend is January 25.
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