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The government on Friday announced that it will borrow over 62 per cent of the Budget Estimate during the first six months (April-September) of the fiscal year 2019-20 starting April 1.
Borrowing is required to finance the fiscal deficit (difference between expenditure and income) of the government. Normally, it is frontloaded during the first half. Meanwhile, the fiscal deficit for the first 11 months of the current fiscal — 2018-19 ending March 31 — has gone up to 134 per cent of the Revised Budget Estimate. However, the government has expressed confidence that it will be able to limit the deficit to the revised target of ₹6.34 lakh crore or 3.4 per cent of the GDP.
Gross borrowing
After getting the nod from the Election Commission, the Economic Affairs Secretary Subhash Chandra Garg announced that the gross borrowing will be ₹4.42 lakh crore, which is 62.3 per cent of the ₹7.10 lakh crore (the full fiscal number) announced in the Interim Budget last month.
“Gross borrowing is on the slightly higher side because of higher repayment,” Garg told reporters, adding that net borrowing will be similar to the five-year average.
The government will make a repayment of ₹1.02 lakh crore during the first half, which means the net borrowing will be over ₹3.40 lakh crore. The borrowing will be spread over 26 weeks at a rate of ₹70,000 crore a week. Similarly, during the second half, the gross borrowing will be ₹2.68 lakh crore, out of which ₹85,000 crore will be used for repayment and ₹50,000 crore for buyback.
Garg also announced introduction of a new benchmark of seven years. This means government bonds will mainly be in the maturities of 1, 2, 5, 7 and 10 years. There are also bonds with maturities of over 10 years and up to 40 years. There will be a change in the maturity brackets too which will now be 1-4 years, 5-9 years, 10-14 years, 15-24 years and 25 years or more.
Talking about treasury bills, the Secretary said the money to be mobilised through the instrument would be ₹20,000 crore a week. Out of this, ₹12,000 crore will be used for repayment, which means net borrowing through treasury bills would be ₹8,000 crore only.
In the meantime, data released by the Controller General of Accounts showed that fiscal deficit for the first 11 months jumped to over ₹8.51 lakh crore. This is 134 per cent of the revised estimate (₹6.34 lakh crore) and over 136 per cent of the Budget Estimate (₹6.24 lakh crore) for the current fiscal.
This higher deficit is originating mainly from receipt side. The revenue receipts in FY19 (April-February) were 73.2 per cent of the revised estimates. Bharat ETF and PFC buying the government’s stake in REC have resulted in the government over-shooting the ₹80,000 crore target.
According to DK Pant, Chief Economist with India Ratings, the space available in capital expenditure in March 2019 (₹42,348 crore) and the ₹5,000- crore over-achievement vis-a-vis the disinvestment target will provide some buffer to the government. “However, the slow pace of tax collection would keep the pressure on the fiscal deficit. A higher GDP number than the one used in the Budget will help the government move closer to the FY2019 fiscal deficit target of 3.4 per cent of the GDP,” he said.
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