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The Centre in consultation with the RBI on Wednesday decided to borrow ₹7.24-lakh crore during first six months of FY 2021-22 beginning on April 1.
“At this point of time, we are going ahead with ₹12.05-lakh crore of gross borrowing for which we are doing 60.06 per cent in the first half of FY. We will take any decision if required at later stage depending on how the year is panning out and how our revenue and other streams are providing us fund,” Tarun Bajaj, Economic Affairs Secretary, said in a virtual press conference.
In percentage terms, borrowing is 5.5 per cent less than borrowing during corresponding period of FY 2020-21. As fiscal deficit for FY is expected to be less than revised estimate, so the Centre is likely to begin next fiscal with better cash balance situation, leading to less frontloading than normally happens during first half.
Bajaj said that during FY21, there was record gross borrowing of over ₹13.71-lakh crore (including back-to-back borrowing of over ₹1.10-lakh crore for GST compensation shortfall), still yield was stable. Weighted average yield has been 5.79 per cent with average maturity of 14.49 years for borrowing taken place during FY 21. However, experts feel that yield may harden in coming days on account of large supply of dated G-sec and state development loans (SDL) along with likelihood of firming of global interest rates.
Bajaj declined to make any guess on change in borrowing on account of uncertainty due to pandemic. “We are handling COVID in different manner this time. Right now there is no such concern on expenditure we will have that but if it comes, we are much better prepared for it than last year when we were taken for surprise,” he said.
Commenting on borrowing programme, Devendra Kumar Pant, Chief Economist with India Ratings, said that as expected government has front loaded its FY 22 borrowing. “The Central government’s fiscal position in FY 22 is expected to be slightly better than FY 21. We noted fiscal deficit during first 11 months as 76 per cent of revised estimate. Also, central government borrowing scheduled for March 26 has been cancelled because of surplus cash. Both these indicate FY 22 to begin on better note,” he said.
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