The Centre has decided to trim borrowing by ₹70,000 crore against the Budget target during the second half of FY19.

Borrowing is meant to bridge the fiscal deficit — the difference between expenditure and income. A decision to lower the borrowing target in the October 2018-March 2019 period was taken at a meeting between the Finance Ministry and the RBI here on Friday.

The Union Budget of 2018-19 provided for a gross borrowing of ₹6.05 lakh-crore, of which ₹2.88 lakh crore was borrowed during the first half. It has been decided ₹2.47 lakh crore will be borrowed during the second half, taking the total to ₹5.35 lakh-crore.

“Since our fiscal deficit is not being affected at all, we had decided to continue with the net borrowing programme as it is. However, we had some rethink on the buyback programme as well, as we expect some more funds to flow from small savings. So we have decided to reduce the total borrowing requirement,” Economic Affairs Secretary Subhash Chandra Garg told reporters here.

The revenue will meet Budget estimates, he said. “In terms of expenditure, even after taking into account MSP and Ayushman Bharat, we are on track. Therefore, there is no need to revise the fiscal deficit at all,” he added. The target for fiscal deficit is 3.3 per cent of GDP.

Garg further said the reduction of ₹70,000 crore will be managed by a mix of reducing buybacks as well as additional flows from small savings.

Inflation Indexed Bonds

The government has also decided to re-introduce Inflation Indexed Bonds, which will be linked to the retail inflation (CPI). Such instruments are considered safe.

Aditi Nayar, Principal Economist at ICRA, said the decision is in line with expectations, following the upward revision in small savings interest rates that was announced recently.

Related Topics
comment COMMENT NOW