MOS (Finance): Macro-economic indicators of late have shown positive trend

MOS (Finance): Macro-economic indicators of late have shown positive trend and the structural reforms undertaken have started contributing to the sustainable growth through participation by States; First Conference of States’ Finance Secretaries held here today attended by the Principal Secretaries/Secretaries Finance of 29 States and two UTs 

The Minister for State for Finance, Shri Jayant Sinha said that the macro-economic indicators of late have shown positive trend and the structural reforms undertaken have started contributing to the sustainable growth through participation by States. He also stressed on the need to increase social sector spending and increase Capital expenditure and at the same time’ strive to remain on path of fiscal consolidation. Shri Sinha was addressing the First Meeting of State Principal Secretaries of Finance/States’ Finance Secretaries here today. He dwelled upon the priorities for an inclusive growth wherein support for the poor people has to be kept in mind. Shri Sinha emphasized on access to financial services; Direct Benefit Transfers (DBTs); removing distress in agriculture by encouraging investment and solving credit issues and tackling the problem of unplanned urbanization among others.

The First Conference of States’ Finance Secretaries convened by Department of Expenditure, Ministry of Finance (MoF) was held here today. Principal Secretaries/Secretaries Finance of 29 States and two UTs have participated in the event. This Conference was convened in the backdrop of Fourteenth Finance Commission’s recommendations which are being implemented from 1st April, 2015 and will continue till 31st March, 2020. Ministry of Finance has mooted the idea of holding this Conference with the objective of enhancing the capital expenditure, social sector expenditure without losing sight of fiscal consolidation.

The Conference was divided into Four Sessions which touched upon the issues of fiscal consolidation at State level; FFC fiscal glide path for 2015-20; transfer of resources to States; Devolution of Central Taxes and linkages with Expenditure Management; Debt Sustainability; Grants-in-Aids just-in-time release; States borrowing and cash management; Funding pattern of Centrally Sponsored Schemes (CSS); and expenditure pattern in States.

It was felt that States need to be sensitized on implications of FFC; convergence of CSSs; increased tax devolution to States be used more for capital expenditure; Financial inclusion and control of unauthorised deposit taking, changing in accounts of classification and linking expenditure to outcomes.

Making his Concluding remarks, Finance Secretary and Secretary (Expenditure), Government of India’ Shri Ratan P. Watal said that the States views on these issues have been taken on board. He said that the deliberations would help the Government to understand States finances better; implementation and governance issues; inclusive and sustainable development; fiscal consolidation; gender budgeting etc. Shri Watal said that thee valuable inputs given by the State Finance Secretaries during the one day Conference would help the Ministry of Finance and State Governments to calibrate their policies further and help run the schemes in a manner which could lead to better expenditure management; fiscal consolidation and achieve true spirit of cooperative federalism. The Finance Secretary said that in future, such Meetings would be held in a much more structured and planned manner on a regular basis.

The Meeting was attended among others by the Secretary, Department of Economic Affairs (DEA) Shri Shaktikanta Das, Secretary, Department of Financial Services (DFS) Ms Anjuli Chib Duggal, Chief Economic Adviser (CEA), Dr. Arvind Subramanian, Special Secretary (Expenditure) Shri A.N Jha and Controller General of Accounts (CGA), Shri M.J. Joseph and Senior Officers of Ministry of Finance. 
Quarterly Report on Debt Management for the Quarter July-September 2015 (Q2 FY 16) Released; During Q2 of FY16, dated Securities worth Rs. 1, 71,000 crore issued taking the Gross Borrowings during H1 FY16 to Rs.3, 51,000 crore (58.5 per cent of BE) 

Since April-June (Q1) 2010-11, Budget Division, Department of Economic Affairs, Ministry of Finance, is bringing-out a Quarterly Report on Debt Management on regular basis. The Current Report pertains to the Quarter July-September 2015 (Q2 FY 16).

            During Q2 of FY16, the Government issued dated securities worth Rs.1,71,000 crore taking the gross borrowings during H1 FY16 to Rs.3,51,000 crore or 58.5 per cent of BE, vis-a-vis 58.7 per cent of BE in H1 FY 15. With repayment of Rs.136,928 crore in H1 FY16, net market borrowings during H1 FY16 were at Rs.214071 crore (46.9 per cent of BE), also lower than 56.0 per cent of BE in the previous year.

The market borrowings calendar for second half of FY16 have been adjusted down by Rs.15,000 crore to take into account expected government borrowings through Sovereign Gold Bond and Gold Monetisation Scheme. Auctions during Q2 of FY16 were held in twelve tranches, broadly in accordance with the pre-announced calendar.

Efforts to elongate maturity were continued during the quarter. The weighted average maturity (WAM) of dated securities issued during Q2 of FY16 was at 16.46 years. The weighted average yield (cut-off) of issuances during Q2 of FY16, was at 7.96 per cent as against 7.92 per cent in Q1 of FY16. Liquidity conditions in the economy remained comfortable and mostly in surplus mode during the quarter. The cash position of the Government during Q2 of FY15 was comfortable and remained mostly in surplus mode barring a few occasions. The issuance amount under Treasury bills were also broadly as per calendar.

The public debt (excluding liabilities under the ‘Public Account’) of the Central Government provisionally increased by 2.1 per cent in Q2 of FY 16 on Q-o-Q basis. Internal debt constituted 92.1 per cent of public debt as at end-September 2015, while marketable securities accounted for 84.5 per cent of public debt.  About 27.2 per cent of outstanding stock has a residual maturity of up to 5 years, which implies that over the next five years, on an average, around 5.4 per cent of outstanding stock needs to be rolled over every year. Thus, the rollover risk in the debt portfolio continues to be low. The implementation of budgeted buy back/ switches in coming months is expected to reduce roll over risk further.

G-sec yields decreased across the curve during the quarter as compared to previous quarter. G-Sec market opened Q2 FY 16 on steady but cautious note and broadly showed positive sentiment in expectations of rate cut from RBI to support growth fundamentalsas inflation numbers moderated. The market saw sharp correction in mid-Aug 2015 on account of devaluation of Chinese Yuan and concerns over slowdown in Chinese economy, which led to massive sell off across asset classes globally. The announcement of Medium Term Framework for staggered increase of FPI limits in debt securities along with announcement of setting FPI limit in rupee term and separate FPI limits for SDLs enthused the market towards end of quarter. The 10Yr benchmark paper touched two year low of 7.48% on this enthususm. The 10 year benchmark yield closed at 7.61% on September 30, 2015 as against 7.87% on June 30, 2015.In Q2 FY16, trading volumes, on an outright basis, decreased by 4.11 per cent over the previous quarter, with G-securities solely contributing to this decrease in trading activity.  The annualised outright turnover ratio for Central government dated securities during Q2 of FY16 also decreased at 4.2 as compared with 4.6 in previous quarter.

The Quarterly Report on Debt Management for the Quarter July-September 2015 (Q2 FY 16) is attached here with and is also available on the Finance Ministry’s website:

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