Govt to borrow Rs 4.34 lakh cr in 2nd half of 2020-21

The Finance Ministry on Wednesday said the government will borrow Rs 4.34 lakh crore in the second half of the current fiscal to meet its expenditure requirement amid COVID-19 crisis afflicting the country’s economy.

With this, the government will stick to the revised borrowing target for the current fiscal. The Centre had revised the borrowing target to Rs 12 lakh crore in May against Rs 7.8 lakh crore approved in the Budget 2020-21.

“Out of this Rs 12 lakh crore, we have already borrowed Rs 7.66 lakh crore, which constitutes 63.83 per cent of the total borrowing that was envisaged at the beginning of the year that is May. This Rs 7.66 lakh crore also includes Rs 68,000 crore as the greenshoe option, which was taken up by the central government,” Economic Affairs Secretary Tarun Bajaj said. He further said the first half borrowing happened at the weighted borrowing cost of 5.82 per cent, the lowest in 15 years.

“Keeping all this in view and anticipating what would happen in the coming half year, we have decided to continue with the same figure of 12 lakh crore as our borrowing for the total year, which basically means that borrowing for the second half of the year would be 4.34 lakh crore. This is 36.16 per cent of the total borrowing,” Bajaj said.

The borrowing will be done in 16 weekly auctions at Rs 27,000-28,000 crore per week and the tenures will be the same as the first half of 2 years, 5 years, 10 years, 14 years, 30 years and 40 years.

Observing that the major portion of the first quarter was under lockdown, Bajaj said there was an impact on the revenues and that was the reason, the government had increased borrowing limit in May.

“However, since the opening up of the economy from June onwards, there has been an improvement in the revenues. Also, the expenditure prioritisation was done and there has been some increase in expenditure in some areas, while we have been able to ensure that the other expenditure which could have been avoided is avoided,” he said.

The government had envisaged raising 58 per cent of the total borrowing target of Rs 6.98 lakh crore from the dated securities in the first half of the current fiscal. Against this, the government has borrowed Rs 7.66 lakh crore during April-September.

The government raises money from the market to fund its fiscal deficit through dated securities and treasury bills.

The Budget has pegged fiscal deficit at 3.5 per cent for the current fiscal, down from 3.8 per cent of the GDP in the last financial year.

Last fiscal, the government had to resort to the “escape clause” in the Fiscal Responsibility and Budget Management (FRBM) Act for deviating from fiscal deficit target to 3.8 per cent from the Budget estimate of 3.3 per cent for 2019-20.

The “escape clause” allows the government to breach its fiscal deficit target by 0.5 percentage points at times of severe stress in the economy, including periods of structural change and those when growth falls sharply.

About deviation from fiscal deficit target, he said the FRBM has a provision that permits deviation in certain circumstance.

“We have to lay down a statement in Parliament which we will do and that is how we are actually borrowing more than what we had planned in the Budget Estimate and what the target mentioned in the FRBM Act,” Bajaj said without giving revised fiscal deficit target number.

When asked if the Finance Ministry has also taken into consideration further stimulus package while fixing second-half borrowing calendar, the secretary said the government has factored in all unexpected development and there is no need to revise the target upward at the moment given the position of revenue collection.

“Based on the way revenue is coming and some extra revenue mobilised, we will manage within the target,” he said.