|2011-12-27 - 11:23:00 - DJ 2nd UPDATE: India Mulls New Steps To Meet Revenue Aim; May Borrow More|
DJ 2nd UPDATE: India Mulls New Steps To Meet Revenue Aim; May Borrow More
By Prasanta Sahu & Mukesh Jagota Of DOW JONES NEWSWIRES (Recasts lead, adds official's comments on more government borrowings in 8th paragraph)
NEW DELHI (Dow Jones)--The Indian government, after the failure--so far--of its much-vaunted plan to raise INR400 billion by selling stakes in state-run companies, is now making increasingly desperate efforts to meet its revenue aim even as it braces to borrow more to fund a gaping budget deficit.
The latest plan is for India to create a company which will take bank loans and purchase the stakes to help New Delhi meet its revenue targets, two senior finance ministry official said Tuesday.
Buying shares through the planned special purpose company would help the government meet its target of raising INR400 billion ($7.6 billion now) by selling stakes in state-run companies in the year through March, one official told Dow Jones Newswires.
"We may even get more than that."
Already nine months into the fiscal year, the government has managed to raise a mere INR11.5 billion of the planned INR400 billion.
The plan has been hobbled by a weak stock market driving valuations lower--the Bombay Stock Exchange's benchmark Sensitive Index is down 23% for the year, hurt by muted foreign capital inflows.
The official, who didn't want to be named, said the proposed company would buy stakes in several state-run companies, including Coal India Ltd. (533278.BY) and Steel Authority of India Ltd. (500113.BY).
New Delhi has been scrambling for options to raise funds after the weak market damped the prospects of public issues.
It even asked some state-run, cash-rich companies to make buyback offers in which the government could sell its shares as well, but that proposal is caught in inter-ministerial squabbles.
The new initiative underscores the government's frantic efforts as tax collections are under pressure amid a slowing economy.
If the government falls short of its revenue target, it may have to borrow more to fund a rising subsidy bill, which is being made worse by a steady weakening of the Indian rupee.
India aims to limit is budget deficit to 4.6% of its gross domestic product this fiscal year, a target which increasingly looks impossible to achieve.
"There has to be some additional borrowing...if [the] deficit increases, there's no option but to borrow extra," another official, who asked not to be named, told Dow Jones Newswires.
The government has already said it will borrow INR528 billion more than its budgeted full-year aim of INR4.17 trillion.
The bond market, groaning under a massive supply of government papers, weakened more after the borrowing comments.
The 8.79% 2021 bond fell to INR101.85 from INR101.93 before the news.
--By Prasanta Sahu & Mukesh Jagota; Dow Jones Newswires; 91-11-43563301 email@example.com
(END) Dow Jones Newswires
December 27, 2011 06:23 ET (11:23 GMT)
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