Reserve Bank of India has forecast that India’s fiscal deficit will fall in the financial year 2009. RBI says the reduction would be in the tune of 0.4 -0.6% in 2008 -2009, and has added that the cash balances of the government have remained in surplus up to July 18.

 

The release from the RBI reveals that the Debt-GDP ratio of the Central and State government will decline to 73.4 % from 77 % in the same financial year. However, in consequence of Sixth Pay Commission, oil and fertilizer subsidy, and farm debt waiver the government finances may come under pressure in 2008-09.

 

Revealing its stand on ongoing increasing inflation rate RBI admits that it has emerged as a global phenomenon, further, it expects the international crude prices to remain high due to the tight demand-supply balance. The cause of Inflation according to RBI are high food and fuel prices and strong demand conditions.

 

 Inflation in the week ended on July 12, 2008 was 11.9 %, and according to RBI it is because of rising crude oil prices, rise in prices of iron and steel and inorganic chemicals. It concludes that the rise in prices of machine and machinery tools, oilseeds and raw cotton too were reflected in the inflation numbers.