Liquidity during April-June in surplus post-demonetisation: FinMin Report

The liquidity in the economy during April-June remained in surplus after demonetisation, though the cash position of the government was somewhat stressed, according to the first quarter (Q1) report on Public Debt Management released by the Finance Ministry on Friday.

“The liquidity in the economy remained in surplus, after the demonetisation, during the quarter, which kept the yield environment low. However, the cash position of the government was somewhat stressed during the quarter, due to mismatch in receipt and payment which is generally seen during the first half of the financial year,” the report said.

“To tide over these mismatch in cash flows of the government, Cash Management Bills (CMBs) of varying durations amounting to Rs 1,30,000 crore were issued during the quarter. CMBs of Rs 40,000 crore were reedemed during the quarter itself,” it said.

The government also took recourse to Ways and Means advance from Reserve Bank of India (RBI) during the spells of cash deficit and drew overdraft briefly during the quarter, the report revealed.

The weighted average maturity (WAM) and weighted average yield (WAY) of the government securities (G-Sec) issuance made during April-June 2017-18 was 14.92 years and 7.01 per cent respectively.

During Q1 2017-18, the government issued dated securities worth Rs 1,68,000 crore (29.0 per cent of Budget Estimate), higher than Rs 1,65,000 crore (28.4 per cent of BE) in Q1 of 2016-17.

“Auctions of both, government dated securities and Treasury Bills during Q1 of 2017-18 were held smoothly,” the report said.

The public debt of the central government provisionally increased by 3.6 per cent in Q1 of 2017-18 on quarter to quarter basis. Internal debt constituted 93.0 per cent of public debt as at end-June while marketable securities accounted for 83.2 per cent of public debt.

G-Sec yields witnessed a volatile trend during the quarter but yields softened at the end of quarter.

Yields hardened during April due to factors such as, cautious mood ahead of first bi-monthly monetary policy of RBI for 2017-18 which maintained a hawkish stance and RBI deciding to maintain the status quo on its key policy rates.

Since 2010-11, Public Debt Management Office, Budget Division, Department of Economic Affairs, Ministry of Finance, is bringing-out the quarterly report on public debt management on regular basis.

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