Higher borrowing is due to repayment programme; Centre sticks to FY19 fiscal deficit target of 3.4%
Gross borrowings of the government during the first half of financial year 2019-20 will stand at ₹4.42 lakh crore, which works out to 62.3% of the total target for the entire year, Economic Affairs Secretary Subhash Chandra Garg announced on Friday.
“At the rate of ₹17,000 crore per week for 26 weeks of the first half of the year, this amounts to ₹4.42 lakh crore, which is 62.3% of the gross borrowing programme of the government for FY20,” Mr. Garg told the media. “The remaining ₹2.68 lakh crore will be the borrowing programme for the second half of FY20.”
The gross borrowing of ₹7.10 lakh crore for the entire year is significantly higher than the ₹5.35 lakh crore borrowing programme for financial year 2018-19. In 2018-19, the government borrowed ₹2.88 lakh crore in the first half, and ₹2.47 lakh crore in the second half. Mr. Garg said that the gross borrowing amount is higher because of the repayment programme of the government and that the net borrowing is actually in keeping with the trend over the last five years.
“If you look at the five year statistics, the net borrowing has been more or less static,” Mr. Garg said.
“The gross borrowing is higher because of the repayment programme. My recollection on net borrowings is that we are not even touching the highest that was touched in the last five years.”
The government’s repayment programme is ₹1.01 lakh crore in the first half of FY20 and ₹1.35 lakh crore in the second half. After accounting for this, the net borrowings stand at ₹3.41 lakh crore in the first half and ₹1.33 lakh crore in the second half.
“We will be introducing a new benchmark for 7-year securities in FY20,” Mr. Garg added. “You would recall that in the current financial year, which is ending today, we had introduced two new benchmarks for two-year security and five-year security.” Mr. Garg also announced that the government had made a change in the maturity buckets, increasing the previous 15-19 year bucket to 15-24 years. Therefore, the previous 20-year and over bucket would be extended to a 25-year and over bucket.
In a separate announcement, the government said that its fiscal deficit for the first 11 months of the current financial year stood at ₹8.51 lakh crore, which is 134.2% of the full year target.
The fiscal deficit, which is the excess of the government’s expenditure over its receipts, stood at ₹7.7 lakh crore in the previous month, which was 121.5% of the full year target.
“We stick to the 3.4% fiscal deficit target for the year,” Mr. Garg said.
“As of now, that is what the target is. It will be finalised when the accounts for the last month are finalised. The last month sees a lot of changes since we receive a lot of direct and indirect taxes collections.”
“FY19 (April-February) fiscal deficit at 134.2% of revised estimate is originating mainly from the receipt side,” Devendra Kumar Pant, chief economist, India Ratings and Research, wrote in a note. “However, the slow pace of tax collections would keep pressure on the fiscal deficit. A higher GDP number than the one used in the Budget will help the government inch closer to the FY19 fiscal deficit [target] at 3.4% of GDP.”
The government’s receipts stood at ₹12.65 lakh crore in the April-February 2019 period, which is 73.2% of the target for the full year. In the same period of the previous year, the government had achieved 78.2% of the full year target by February-end.
The government’s expenditure in the first 11 months of the financial year stood at ₹21.88 lakh crore, which is 89.1% of the target for the full year. It was 90.1% in the same period of the previous year.