Govt to borrow Rs 50,000 crore more via Gilts; gross borrowing target at Rs 6.3 lakh crore

The Centre will borrow additional Rs 50,000 crore during January-March, raising the gross market borrowing target of the government to Rs 6.3 lakh crore for the financial year 2017-18.

“The government will raise additional market borrowings of Rs 50,000 crore only in fiscal 2017-18 through dated government securities,” the finance ministry said in a statement.

The extra borrowing during the current financial year may become a hindrance for the government to stick to the fiscal deficit target of 3.2 percent of the Gross Domestic Product (GDP) during 2017-18. However, the government is yet to specify any details pertaining to this.

According to experts, the fiscal deficit could widen from this financial year's target owing to an estimated revenue shortfall owing to uncertainty tax collection due to the introduction of Goods and Services Tax (GST) from July 1. Revenue collection from GST in November fell to its lowest since implementation to Rs 80,808 crore.

“Although the sequential dip in GST collections in November 2017 stems from the cut in rates, it is nevertheless disheartening. Moreover, the extended timelines for filing GST returns imply that the government would receive tax inflows for a large portion of indirect taxes for 11 months in 2017-18,” Aditi Nayar, Principal Economist at ICRA said

The government, every year borrows from the market to reach its yearly expenditure and interest payment obligations. The gross borrowing for 2017-18 was pegged at Rs 5.8 lakh crore, with net borrowing aim at Rs 4.25 lakh crore, after taking into account the redemption figures.

However, there will not be any revision in the net borrowing target, as the government has decided to slash trim down the T-Bills from present collections to Rs 25,006 cr from Rs 86,203 cr by March-end, the ministry said in a release. Net borrowing was budgeted at Rs 4.23 lakh cr.

“While the upward revision in the government of India's dated issuance calendar for January-February 2018 is being offset by the reduction in the planned T bills issuance, concerns regarding a mild fiscal slippage persist on account of the sequential dip in GST collections for November 2017,” Nayar said.

“The risk of a slippage relative to the fiscal deficit target for FY2018 stems primarily from the growing likelihood that tax revenues, dividends and inflows from other communication services would undershoot the budgeted level. 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 January-March, 2017-18,” Nayar said.

The government has already borrowed Rs 5.21 lakh crore or close to 90 percent or total gross borrowing during April-December in 2017-18.

In September, Economic Affairs Secretary Subhash Chandra Garg said that the government is unlikely to breach the fiscal deficit target during the current financial year, adding that the assessment of additional borrowing to be done in December.

Last week, Finance Minister Arun Jaitley sought parliamentary nod for gross additional expenditure of Rs 66,113 cr, with net cash outgo from the exchequer being Rs 33,380 cr. These expenses were mainly sought for meeting additional demands through second supplementary demand for grants for rural job guarantee scheme, and payment of urea subsidies