Govt to borrow Rs 50,000 crore more, may miss fiscal deficit target
The increase in borrowings comes at a time when the government's revenue collections have fallen after the launch of the national Goods and Services Tax in July that complicated tax filings for businesses and hit the economy.
- Dec 28, 2017,
- Updated Dec 28, 2017 10:39 AM IST
The government announced on Wednesday that it would go in for an additional borrowing of Rs 50,000 crore during the current financial year, raising concern that the country may miss the fiscal deficit target fixed at 3.2 per cent of GDP. However, the Arun Jaitley-headed Finance Ministry issued a statement saying there will be no change in the net borrowing as envisaged in the Budget for 2017-18.
The increase in borrowings comes at a time when the government's revenue collections have fallen after the launch of the national Goods and Services Tax in July that complicated tax filings for businesses and hit the economy. Aditi Nayar, an economist at ICRA, the Indian arm of rating agency Moody's, said the additional borrowing could lead to a "modest fiscal slippage" as the government was likely to miss its revenue receipts target.
Figures compiled by the Controller General of Accounts (CGA) show the government has already spent Rs 12.92 lakh crore in the eight months to October of the current fiscal, about 60 per cent of the budgeted spending, while revenue collections were just 48 per cent of the target. The finance ministry said that after the review of the borrowing programme with the RBI, it was decided that the government will raise additional market borrowings of Rs 50,000 crore in 2017-18 through dated Government securities. At the same time this would be offset by a reduction in T-Bills from present collections of Rs 86,203 crore to Rs 25,006 crore by March 2018.
T-Bills are securities with short-term duration of less than one year while dated securities have maturity of over five years. The government will thus, between now and March 2018, not be raising any net additional borrowing as T-Bills will be run down by Rs 61,203 crore and additional G-Sec borrowing will be Rs 50,000 crore, the statement explained.
In the Budget for 2017-18, gross and net market borrowing were pegged at Rs 5.80 lakh crore and Rs 4.23 lakh crore respectively with Rs 3.48 lakh crore being raised (net) from dated Government securities and Rs 2,002 crore from T-bills, the finance ministry statement said. Noting that borrowings till December 26, 2017 have been conducted in line with the borrowing calendar fixed for the fiscal, it said, gross and net market borrowings are Rs 5,21,000 crore and Rs 3,81,281 crore, excluding buyback/switches, respectively as on December.
However, as against the budgeted net T-bills receipt of Rs 2,002 crore, net collections till December 26 2017 are Rs 86,203 crore, it said. Finance Minister Arun Jaitley had pegged the fiscal deficit target of Rs 3.2 per cent of GDP for the current fiscal. Additional borrowing by the government may have impact on the fiscal math. Since the revenue collection from the Goods and Services Tax (GST) is slightly lower than expected in the last two months, the additional borrowing would help bridge the shortfall.
Analysts said the fiscal deficit could now rise to 3.5 percent of gross domestic product, against Finance Minister Arun Jaitley's stated target of 3.2 percent. "Given the clouded outlook for revenues, sticking to the fiscal consolidation roadmap would entail compression of expenditure, which would dampen the expected economic growth recovery in the March quarter," Nayar said.
The GST collections slipped to their lowest in November as rates were cut on dozens of goods to make the new national sales tax regime more acceptable. Total collections under the GST in November slipped for the second straight month to Rs 80,808 crore, down from Rs 83,346 crore in the previous month.
The government announced on Wednesday that it would go in for an additional borrowing of Rs 50,000 crore during the current financial year, raising concern that the country may miss the fiscal deficit target fixed at 3.2 per cent of GDP. However, the Arun Jaitley-headed Finance Ministry issued a statement saying there will be no change in the net borrowing as envisaged in the Budget for 2017-18.
The increase in borrowings comes at a time when the government's revenue collections have fallen after the launch of the national Goods and Services Tax in July that complicated tax filings for businesses and hit the economy. Aditi Nayar, an economist at ICRA, the Indian arm of rating agency Moody's, said the additional borrowing could lead to a "modest fiscal slippage" as the government was likely to miss its revenue receipts target.
Figures compiled by the Controller General of Accounts (CGA) show the government has already spent Rs 12.92 lakh crore in the eight months to October of the current fiscal, about 60 per cent of the budgeted spending, while revenue collections were just 48 per cent of the target. The finance ministry said that after the review of the borrowing programme with the RBI, it was decided that the government will raise additional market borrowings of Rs 50,000 crore in 2017-18 through dated Government securities. At the same time this would be offset by a reduction in T-Bills from present collections of Rs 86,203 crore to Rs 25,006 crore by March 2018.
T-Bills are securities with short-term duration of less than one year while dated securities have maturity of over five years. The government will thus, between now and March 2018, not be raising any net additional borrowing as T-Bills will be run down by Rs 61,203 crore and additional G-Sec borrowing will be Rs 50,000 crore, the statement explained.
In the Budget for 2017-18, gross and net market borrowing were pegged at Rs 5.80 lakh crore and Rs 4.23 lakh crore respectively with Rs 3.48 lakh crore being raised (net) from dated Government securities and Rs 2,002 crore from T-bills, the finance ministry statement said. Noting that borrowings till December 26, 2017 have been conducted in line with the borrowing calendar fixed for the fiscal, it said, gross and net market borrowings are Rs 5,21,000 crore and Rs 3,81,281 crore, excluding buyback/switches, respectively as on December.
However, as against the budgeted net T-bills receipt of Rs 2,002 crore, net collections till December 26 2017 are Rs 86,203 crore, it said. Finance Minister Arun Jaitley had pegged the fiscal deficit target of Rs 3.2 per cent of GDP for the current fiscal. Additional borrowing by the government may have impact on the fiscal math. Since the revenue collection from the Goods and Services Tax (GST) is slightly lower than expected in the last two months, the additional borrowing would help bridge the shortfall.
Analysts said the fiscal deficit could now rise to 3.5 percent of gross domestic product, against Finance Minister Arun Jaitley's stated target of 3.2 percent. "Given the clouded outlook for revenues, sticking to the fiscal consolidation roadmap would entail compression of expenditure, which would dampen the expected economic growth recovery in the March quarter," Nayar said.
The GST collections slipped to their lowest in November as rates were cut on dozens of goods to make the new national sales tax regime more acceptable. Total collections under the GST in November slipped for the second straight month to Rs 80,808 crore, down from Rs 83,346 crore in the previous month.