Budget 1997-98: Full Text
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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