Government to borrow Rs 50000 crore more from market in FY18

In a worrying sign India reported a fiscal deficit of Rs 6.12 lakh crore for the April November period

N.R. Bhanumurthy, professor of economics at the National Institute of Public Finance and Policy, said the 3.2% fiscal deficit target was estimated in a business-as-usual scenario. "It is hard to estimate the impact of additional borrowing on fiscal deficit since revenue mobilization is now in an uncertain territory", he added.

Saugata Bhattacharya, chief economist, Axis Bank, said, "Market borrowing is only a part, we have to see how much is the corpus in various small savings schemes".

The Government on Wednesday chose to make additional market borrowing of only 50,000 crore in the remaining period of the current fiscal year to meet expenditure, confirmed SC Garg, Secretary of Department of Economic Affairs (DEA).

After the announcement, experts assessed that India's fiscal deficit for the ongoing financial year could move up to 3.5 per cent compared to the budgeted 3.2 per cent.

Announcing the calendar, a finance ministry release said, "The borrowing programme of the Government of India has been reviewed, with RBI, and following decisions taken: (i) The Government will trim down the T-Bills from present collections of Rs 86,203 crore to Rs 25,006 crore by March end, 2018".

T-bills are securities with short-term duration of less than one year while dated securities have longer maturity. The government will be borrowing Rs 1.79 lakh crore (gross) in the last quarter of FY18 through 91-day, 182-day and 364-day T-Bills.

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The obvious reason for the decline in GST collection is the reduction of items in the high tax bracket of 28 per cent to lower levels.

It further said notwithstanding bank recapitalisation, the sell off in G-secs is delaying lending rate cuts and pushing back recovery. Total collections under the GST in November slipped for the second straight month to Rs 80,808 crore, down from Rs 83,346 crore in the previous month.

In April-October, the fiscal deficit scaled 96.1% of the fiscal deficit targeted for the full year against 79.3% during the same period a year ago due to higher revenue expenditure, according to data from the Controller General of Accounts.

"While we did not expect any breach in the FY2017-18 fiscal deficit target, we will wait for clarity about whether this additional borrowing will make up for revenue shortfalls or fund relaxation of the 3.2 per cent of GDP FY18 fiscal deficit target", the report noted.

Finance Minister Arun Jaitley had earlier budgeted to raise Rs 5.8 lakh crore ($90.45 billion) in 2017-18 via bond sales to bridge the fiscal deficit of 3.2 per cent of GDP. "As against the budgeted net T-bills receipt of Rs 2,002 crore in FY18, net collections till December 26, 2017, are Rs 86,203 crore". Consequently, the G-Sec auction size has increased to Rs 15,000 crore for the last five auctions of FY2018.

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