After opening the day flat, Share markets in India witnessed volatile trading activity and are presently trading in the red. Sectoral indices are trading on a mixed note with stocks in the consumer durables sector and auto sector witnessing maximum buying interest. Energy stocks and capital goods sector are trading in the red.

The BSE Sensex is trading down by 62 points (down 0.2%) and the NSE Nifty is trading down by 30 points (down 0.3%). The BSE Mid Cap index is trading down by 0.3%, while the BSE Small Cap index is trading down by 0.2%. The rupee is trading at 65s.44 to the US$.

In news from the PSU sector. According to an article in a leading financial daily, the central government is turning to state-owned enterprises to make up for the shortfall in revenues.

The article notes that the Finance Ministry assessed the financial health of 14 state-owned firms and asked 12 of the companies to pay out between 30% and as much as 100% of their FY17 or FY18 net profits in dividends, share buybacks or bonus issues. Two companies were exempted.

The government has often used dividends from state-owned firms as a means to meet the fiscal deficit targets.

India’s central budget is under pressure this year following an unexpected slump in economic growth, which saw GDP (gross domestic product) growth, slips to its lowest level in three years.

As of September, the half-way mark for the fiscal year, the budget deficit had reached over Rs 5 trillion or more than 91% of its full-year target. A sharp fall in dividends from the Reserve Bank of India (RBI) owing to demonetization costs added to the shortfall.

With this measure, the government hopes to stick to its fiscal deficit target for the year.

Fiscal Deficit target of 3% of GDP

One of the important yardstick to measure the financial health of an economy is a fiscal deficit. It is the difference between the government revenues and expenditure. The difference is generally bridged by debt. The present government is committed to reduce the gap. The long-term fiscal deficit target is 3% of the Gross domestic product (GDP). This simply means relatively less expenditure. Hence, less government spending.