MS Gopikrishnan of Standard Chartered Bank says it is tough for the government to meet the 3.3 percent fiscal deficit target for the current financial year.
The government data released on Thursday showed that the fiscal deficit in the April-November period stood at Rs 7.17 lakh crore or 114.8 percent of the budgeted target for the fiscal year that ends in March. The government is also mulling a basic farm income to all farmers which could amount to Rs 1 lakh crore.
"Although there would be slippages in the fiscal deficit target the government does have control on the cash balance," said Gopikrishnan.
According to him, the fiscal deficit number wasn't a big surprise as there has been a short fall in the revenue collection, which gets reflected in the numbers. However, the farm distress subsidy was a surprise, he said.
The bond markets will definitely react negatively, said Gopikrishnan, adding that the support of OMO could cap the yield rise in the coming days.
The bond yields are likely to remain between 7.2-7.3 percent and with the OMO purchases going through, the yields will remain range bound in January and February, he said.