With this announcement, the centre's gross borrowing programme in fiscal 1999 has gone up to Rs 80,452 crore against the budgeted Rs 79,376 crore. The net borrowing programme -- which is now pegged at Rs 55,000 crore -- had been already been exceeded. The net market borrowing programme was pegged at Rs 48,326 crore.

Reserve Bank governor Bimal Jalan and deputy governor YV Reddy have continously been warning the government on the fiscal front saying that the market will not be able to absorb such a large amount of government papers without any impact on interest rates.

"The importance of containing fiscal deficit tobudgeted levels in the current year cannot be over-emphasised. The present inflation rate is a matter of concern and the outlook for industrial growth continues to be uncertain. Any increase in fiscal deficit will put further pressure on the outlook for medium and long-term interest rates, besides adding to the already high rate of monetary growth," Jalan had stated in his October mid-term review of monetary and credit policy.

The RBI governor had warned: "Beyond a point it is simply not feasible for banks and financial institutions to increase the share of government securities in their overall asset portfolio without affecting their own viablity -- and indeed the viablity of the productive sector of the economy." Analysts said the Reserve Bank has till now done well by keeping interest rates in check while carrying out the market borrowing programme. However, it may not be able to sustain the trend if the government keeps on entering the market. "The only way to avoid pressure on interest rates is to tapnon-bank entities to share the burden of government borrowings. The centre can explore the possibility of privately-placing papers with insurance companies," an analyst with a brokerage said.

In fiscal 1998, the deficit exceeded the target by Rs 20,891 crore. This was funded mainly through excess small-savings collections and additional market borrowings. "The higher amount budgeted for small saving among others this year provides little leeway and most of the fiscal slippage will have to be to be funded from additional market borrowings," ICICI-Securities debt analyst MR Madhavan said.

The ICICI investment banking arm said that the fiscal deficit is likely to overshoot the targeted Rs 91,025 crore by at least 15,000 crore.