New figures suggest the government will not be able to meet its own target for the year-end fiscal deficit. India’s fiscal deficit increased to 1.8% of GDP in the first quarter. In the year-ago period it was just 0.6%.The government’s target for the fiscal deficit by March of next year is 4.6%. But a lot of factors are stacked against it. Besides the higher than expected deficit for the first quarter, there are likely to be steep oil import bills to pay through the year. The government says the fiscal deficit was relatively low last year thanks to the 3G auction.
Meanwhile the Reserve Bank is looking to give Indian companies more space for borrowing from banks. RBI governor D Subbarao has said the statutory liquidity ratio or SLR needs to be brought down. The SLR defines the amount of government bonds that banks are mandated to buy using their deposits. RBI cut the SLR back in December by 1% point to its current level of 24%.
Switching gears, Maruti Suzuki is trying to keep up production while a lockout continues at its Manesar factory. Mint has learnt the company has shifted key work on the new version of its Swift car to its Gurgaon plant. This is largely work that requires manual intervention. Meanwhile, automated work like welding and painting continue at the Manesar plant. Maruti has faced problems in Manesar since June. The latest face-off started when workers at Manesar refused to sign a so-called good conduct bond drafted by the management.