Representative image showing Rs 500 notes and a calculator.
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Finance Minister Nirmala Sitharaman will present the Union Budget on February 1.
The Union Budget is presented in Parliament for the upcoming financial year, highlighting the Indian government's annual financial statement with estimated receipts and expenditure.
Ahead of the approaching Budget, let's break down some of the terminology associated with the exercise.
What is government borrowing?
The government borrows through the issue of government securities called G-secs and Treasury Bills. It is a loan taken by the government that falls under capital receipts in the Budget document. Whenever the tax and non-tax revenue falls short to finance the government's spending, the government announces an annual borrowing programme in the Budget every year.
Where does the government borrow from?
It borrows from the market, small savings funds, state provident funds, external assistance and short-term borrowings. Market borrowing, however, is the major source to finance the fiscal deficit.
Does borrowing have an adverse impact on the economy?
It has two kinds of impact. One, if the government borrows more from the market, it implies that it has left very little space for the private sector and corporates to access the market.
Secondly, large government borrowing shoots up the interest rates for all other borrowers in the market, in turn, it increases the debt repayment burden of the government and also pushes up the rate of investment in the economy which in turn leads to slowing economic growth.