Centre cuts H2 FY19 borrowings by Rs 70k cr

The Centre will borrow Rs 70,000 crore less from the market in October-March period than it estimated in the Budget for 2018-19, a move that could calm the foreign portfolio investors exiting the country and save the stock, bond and money markets from going into a panic mode amid liquidity crisis faced by a few Non-banking financial companies (NBFCs).

The decision comes in the wake of the government expecting a more earnings from small savings after it raised the interest rates on them last week. The interest rates across the small savings schemes were increased by close to a percentage point for October-December quarter.

“We have decided to reduce borrowing requirement by Rs 70,000 crore. The gross borrowing for the second half of 2018-19 will be at Rs 2.47 lakh crore. The reduction in borrowing will be supported by additional buy backs and enhanced flow from the small scheme savings,” Department of Economic Affairs Secretary Subhash Garg told reporters here.

He said that there was also no need to revise the fiscal deficit target as the government confident of meeting its revenue collection target set in the Budget this year.

The Centre's direct tax collections grew by 6.6% in the April-July period as against an estimated growth of 14.5% for the fiscal 2019. However, the government is confident of meeting this target as a big chunk of direct tax comes in January-March period or the fourth quarter. Senior government officials said they were hopeful that the direct tax revenues would be comfortable this year and would make up for the GST revenue shortfall.

Market experts said that the government's reiteration to keep the fiscal deficit intact at 3.3% this year is expected to instill confidence among investors, particularly the foreign portfolio investors, investments by whom in the capital market is considered as hot money and can leave the market on short notice putting an undue pressure on the currency, among other things.

Experts also said that despite an additional expenditure outgo on the recently launched health programme 'Ayushman Bharat' and on oil front, the government's move to borrow less is expected to see a relief rally in the Indian markets when they open on Monday.

The step will also ease the pressure on the yields of G-Sec bonds. The yields are above 8% on the 10-year benchmark bonds now.