Public debt increases by 3.2% to Rs 33.82 lakh crore in Oct-Dec quarter

Decreased capital inflows and lower revenue collections have increased government’s public debt by 3.2% in the third quarter of FY’12 as compared to its second quarter. However, this was lower than the 4.7% increase seen in the previous quarter. Public debt stood at Rs 33,82,645 crore in the October-December quarter, up from Rs 32,76,368 crore in the last quarter. The increase in debt can be attributed to the increase in government borrowings due to decreased capital inflows and lower tax revenue collections.

Internal debt during October-December this fiscal constituted 89.9% of public debt as compared with 89.6% at the end of the second quarter, the outstanding internal debt of the government stood at Rs 30,41,895 crore constituted 33.9% of GDP compared with 32.7% at end-September 2011. The government's market borrowings through dated securities went up by Rs 52,872 crore as against the budget estimates during the second half of the fiscal, following a shortfall in other modes of financing. Also, on review of the government's overall funding requirements, another Rs 40,000 crore was picked up from the market to take the total increase to Rs 92,872 crore during the fiscal year.

The need for higher borrowings was owing to the fact that inflows in terms of foreign direct investment (FDI) and portfolio investment by foreign institutional investors (FIIs) remained subdued during October-November 2011 as in the second quarter of 2011-12. As a result, there was a net outflow of capital in October and only a marginal inflow in November.

Marketable securities, consisting of rupee denominated dated securities and treasury bills/cash management bills, accounted for 79.1% of total public debt during the period ending December compared with 78.4% at end-September 2011. As at end of December 2011, the proportion of debt maturing in less than one year declined to 3.7% from 4.3% a quarter ago, while debt maturing within 1-5 years came down to 25.3% from 26.7% at end-September 2011. The 10-year bond yield increased from 8.44% at end-September 2011 to 8.54% at end-December 2011. The yields went up sharply during the quarter due to policy rate hike of 25 bps by the Reserve Bank on October 25 as well as supply concerns.

Further, gross tax collections during the period at 63.5% of Budget Estimates (BE) were lower than 70.7% a year ago. Non-tax revenue at 62.2% of BE was lower than previous year mainly reflecting the impact of telecom receipts in 2010-11. However, total expenditure as percent of BE at 71.3% during April-December 2011 was broadly similar to 71.0% year-on-year. Thus, revenue deficit and gross fiscal deficit during April-December 2011 at 93.1% and 92.3% of BE, were higher, mainly reflecting the impact of large refunds under directs taxes early this year and higher telecom receipts in the previous year.

The report on quarterly data on ‘Public Debt Management' recently released by the Finance Ministry has noted that the fiscal outcome during April-December of FY’12 indicates that all the key deficit indicators as percentage of budget estimates for 2011-12 were higher than their levels during the corresponding period of the previous year because of lower revenue collections both from tax and non-tax sources.