Govt pegs market borrowing at Rs 7.24 lakh cr for first half of FY22

The government on Wednesday said it will borrow Rs 7.24 lakh crore in the first half of 2021-22 fiscal to meet resources to perk up the economy hit by the coronavirus pandemic.

According to the Budget 2021-22, the government's gross borrowing was estimated at Rs 12.05 lakh crore in the financial year beginning April 1.

"In the Budget, we had announced that there would be a gross borrowing of Rs 12.05 lakh crore and net borrowing of Rs 9.37 lakh crore.

"In the first half of 2021-22, we would be borrowing Rs 7.24 lakh crore, which is 60.06 per cent of the gross issuances," Economic Affairs Secretary Tarun Bajaj said.

He said the government would issue 2-year, 5-year, 10-year, 14-year, 30-year, and 40-year securities.

On the expected rate for the next financial year, Bajaj said the Reserve Bank of India (RBI) will take appropriate action to ensure that yields remain in reasonable limit.

Gross borrowing includes repayments of past loans. Repayment for past loans in the next financial year has been pegged at Rs 2.80 lakh crore.

"The gross borrowing from the market for the next year would be around Rs 12 lakh crores.

"We plan to continue with our path of fiscal consolidation, and intend to reach a fiscal deficit level below 4.5 per cent of GDP by 2025-26 with a fairly steady decline over the period," Finance Minister Nirmala Sitharaman had said while presenting Budget 2021-22 last month.

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 6.8 per cent for the next fiscal, down from 9.5 per cent of the gross domestic product (GDP) in the current financial year.

"The fiscal deficit in RE 2020-21 is pegged at 9.5 per cent of GDP. We have funded this through government borrowings, multilateral borrowings, small saving funds and short-term borrowings," she had said.

Bajaj said the fiscal deficit for the current fiscal would be around the Revised Estimate announced in the Budget.

"Fiscal deficit number in February may be low at 76 per cent but in March, we have pushed a lot of expenditure. So, it should be closer to the number mentioned in RE in the Budget," he said.

Asked if there would be pressure on expenditure because of fresh COVID-19 wave, he said there is no concern at the moment.

"If there are pressure, we are much better prepared to handle it than March last year," he said.

With regard to inclusion of of government bonds in global indices, he said efforts are on and it should happen in the next financial year.

During the current fiscal, he said the government has done record gross borrowing in the history of the finance ministry.

As against the Revised Estimate of Rs 12.80 lakh crore, the government borrowed Rs 12.60 lakh crore during the current fiscal as the last auction of Rs 20,000 crore was cancelled.

In addition, the Government of India borrowed Rs 1.10 lakh crore on behalf of states for compensation towards goods and services tax (GST) shortfall.

In all, the government borrowing was Rs 13.71 lakh crore, while the net borrowing was Rs 11.03 lakh crore during the current fiscal.

Bajaj said the yields during the year remain stable except during the past few auctions that happened during March.

The record borrowing was done at a weighted average borrowing cost of 5.79 per cent which is the lowest since 2004-05, he said adding that the weighted average maturity was 14.5 years.

Meanwhile, the RBI circular said the limits for FPI investment in corporate bonds will remain unchanged at 15 per cent of outstanding stock of securities for the financial year 2021-22.

Accordingly, the revised limits for FPI investment in corporate bonds will be Rs 5,74,263 crore (April-September 2021) and Rs 6,07,039 crore in the second half of the fiscal. The current limit is Rs 5,41,488 crore.

The central bank further said the revised limits for FPI investment in central government securities (G-secs) and state development loans (SDLs) for 2021-22 will be announced separately. The current limit of Rs 2,34,531 (G-sec general), Rs 1,03,531 (G-secs long-term), Rs 67,630 crore (SDL general) and Rs 7,100 (SDL long-term) will continue till the annoucement is made regarding revised limits.