Centre to borrow Rs 50,000 crore more

New Delhi: India will borrow an additional Rs 50,000 crore this fiscal through dated securities, which may result in breach of the fiscal deficit target for the first time in four years.

Finance minister Arun Jaitley had set a fiscal deficit target of  3.2 percent for the current fiscal. However, it will be interesting to see if government will asks PSUs to cough up more dividends to generate more revenue.  

India is having to raise the extra funds as the government has already spent over $200 billion in the eight months to October, about 60 per cent of the budgeted spending,while revenue collections were just 48 per cent of the target.

After the review of the borrowing programme with the RBI, it was decided that “the government will raise additional market borrowings of Rs 50,000 crore only in fiscal FY18 through dated government securities,” said a government statement.

“The change in the long term (market borrowings) and short term (T-bills) issuance calendars neither confirm nor rule out a fiscal slippage in FY18,” said Aditi Nayar, an economist at Icra.

She said that concerns regarding a mild fiscal slippage persist on account of the sequential dip in GST collections for November 2017.

The risk of a slippage relative to the fiscal deficit target for FY18 stems primarily from the growing likelihood that tax revenues, dividends and inflows from other communication services would undershoot the budgeted level. “Given the clouded outlook for revenues, sticking to the fiscal consolidation roadmap would entail compression of expenditure, which would dampen the expected economic growth recovery in Q4 FY18,” added Ms Nayar.  

The finance ministry said that there will be no change in the net borrowing as envisaged in the Budget for FY18.

The government will trim down the T-Bills from present collections of Rs 86,203 crore to Rs 25,006 crore by March 2018. T-Bills are securities with short-term duration of less than one year while dated securities have maturity of over five years.

“The government will thus, between now and March 2018, not be raising any net additional borrowing (T-Bills will be run down by Rs 61,203 crore and additional G-Sec borrowing will be Rs 50,000 crore),” it said.

In the Budget for FY18, gross and net market borrowing were pegged at Rs 5.80 lakh crore and Rs 4.23 lakh crore respectively with Rs 3.48 lakh crore being raised (net) from dated government securities and Rs 2,002 crore from T-bills, a finance ministry statement said.