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Without showing precipitancy on account of cash management, the Government on Tuesday announced that it would borrow 62.5 per cent of its budget estimate during the April-September period. At the same time, the Finance Ministry assured that there would be no problem in meeting all the commitments on account of COVID-19.
Borrowing is done to meet the fiscal deficit. This year, gross borrowing is estimated at ₹7.8 lakh crore out of which the government decided to borrow ₹4.88 lakh crore following consultation with the Reserve Bank of India. Long term dated government securities (G Sec) are used for borrowing,
“If you go through the entire scheme of things to enable the government to have sufficient amounts to do its cash management to meet the requirements and the government is committed to meet its requirement for fighting COVID-19 whether on account of health issue or on account of protecting the economy and also providing necessary stimulus at any point of time, the entire borrowing programme has been designed deep in that fashion,” Economic Affairs Secretary Atanu Chakraborty said in a press briefing here .
Bonds to be issued in weekly tranches of ₹19-21,000 crore. These will be of different maturities (2, 5, 10, 14, 30 and 40 years). There will also be Floating Rate Bonds with a tenor of 13 years. When asked about the impact of fund flow for the productive sector and implications for interest rate, the Secretary said that thrust of both monetary policy and opening up of the markets especially to specified securities (tenor of 5,10 and 30 years) would have downward pressure on the interest rate.
He said that the borrowing plan had been drawn up keeping in view the anticipated demand following opening up of the Fully Accessible Route for non-residents investors. WMA (Ways and Means) limit proposed to be revised to ₹1.20 lakh cr and to be reviewed on a need-basis, compared to ₹75,000 crore in H1 of FY 2019-20. Annual Maturity Ceilings being revised to accommodate higher issuances in the FY 21, from ₹3.25-4.75, lakh cr to 5-7 lakh crore. Switches auction of G-secs will be held on every third Monday of the month. Switches and buy-back combined will be at ₹2.7 lakh cr for the whole year.
He also informed that G-sec issuances through Debt ETF route is proposed to be rolled out soon by initiating appointment of required intermediaries. The budget announcement related to debt ETF would be operationalised during the second half of 2020-21.
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