* RBI chief says India has highest govt borrowing among G20
* Calls for caution in providing govt-backed credit
* Adds will aim to keep inflation at 4 percent
(Updates to add details)
By Aditi Shah and Suvashree Choudhury
GANDHINAGAR/MUMBAI, Jan 11 (Reuters) - Reserve Bank of India
Governor Urjit Patel urged the government on Wednesday to show
some progress in cutting high federal and state government
borrowing, just weeks before Prime Minister Narendra Modi's
administration is due to unveil its annual budget.
Patel, in a speech at the Vibrant Gujarat summit, said the
government debt to gross domestic product ratio was also taking
its toll on the country's sovereign ratings.
India's total fiscal deficit, combining the levels of the
federal and state governments, was among the highest in G20
countries, Patel said, citing International Monetary Fund data.
India's current fiscal deficit is targeted at 6.4 percent of
GDP at the combined state and federal level for the year ending
in March. Modi's government will announce its new federal
deficit target on Feb. 1, when it unveils its annual fiscal
"We have to take cognisance of these comparisons and facts
as we go forward to make progress. Specifically this will help
us to better manage risks for ourselves and thereby mitigate
financial volatility," Patel said.
The RBI Governor also said the government needed to be
mindful of subsidising credit or providing credit guarantees,
saying such schemes can add to government debt.
Modi unveiled a series of incentives to provide cheaper
credit to the poor, farmers, women and small businesses at a
speech on Dec. 31.
"While some government guarantees and limited subventions
can help, steep interest rate subventions and large credit
guarantees also impede optimal allocation of financial resources
and increases moral hazard," Patel said.
Patel added that India needed to ensure its medium-term
consumer-prices based inflation target of 4 percent was "secured
on a durable basis" while touting the importance of "low and
stable inflation", sticking to his previous comments on the
The RBI Governor noted as well that the central bank would
continue to press ahead with a "fluid transmission" of monetary
policy, while urging the government to infuse "adequate
provision of capital" to the domestic banking system.
The comments came less than two weeks after lenders
announced steep cuts in their lending rates.
(Reporting by Aditi Shah and Suvashree Choudhury; Editing by
Rafael Nam and Nick Macfie)