Budget Speech - PART A
Phasing out of Ad Hocs
- Hon'ble Members will recall that in my last Budget speech I had promised to present concrete proposals in this Budget to phase out the system of ad hoc treasury bills by 1997-98. I am glad to announce that the government and the RBI have worked out the specific measures in this regard.
- The system of ad hoc treasury bills to finance the budget deficit will be discontinued with effect from April 1, 1997. A scheme of ways and means advances (WMA) by the RBI to the Central government is being introduced to accommodate temporary mismatches in the government's receipts and payments. This will not be a permanent source of financing the government's deficit. Besides ways and means advances, RBI's support will be available for the government's borrowing programme. Details of the scheme are being separately announced by the RBI.
- What I am effecting today is a bold and radical change which will strengthen fiscal discipline and provide greater autonomy to the RBI in the conduct of monetary policy. With the discontinuance of ad hoc treasury bills and tap treasury bills, and the introduction of ways and means advances, the concept of Budget deficit, as currently defined, will lose its relevance either as an indicator of short-term requirement of funds by the government or the extent of monetisation. Therefore, it is proposed to discontinue the practice of showing the 'Budget deficit'; instead Gross Fiscal Deficit (GFD) would become the key indicator of deficit. The extent of RBI support to the Central government's borrowing programme will be shown as "Monetised deficit" in the Budget documents.
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