The Centre will borrow a record Rs 15.43 lakh crore from the markets in 2023-24 to finance its fiscal deficit of 5.9 percent of Gross Domestic Product, Finance Minister Nirmala Sitharaman said in her Budget speech in Parliament on February 1.
At Rs 15.43 lakh crore, the gross borrowing target for next year is 3.2 percent higher than this year's budget estimate of Rs 14.95 lakh crore.
However, the Centre's actual borrowing for the current year is set to be lower at Rs 14.21 lakh crore on account of the Reserve Bank of India (RBI) swapping some government bonds maturing this year with those maturing in subsequent years just days before Sitharaman presented the budget for 2022-23 on February 1, 2022.
As such, the gross borrowing programme for 2023-24 is 8.6 percent higher than what will be borrowed in 2022-23.
On a net basis, the Centre's borrowing for next year has been pegged at Rs 11.8 lakh crore, up from Rs 11.19 lakh crore in 2022-23. Follow our live blog for the latest Budget 2023 updates
The expansion of the borrowing programme, which will see the RBI issue government bonds on behalf of the Centre via auctions held every Friday, is broadly in line with the market's expectations.
According to a Moneycontrol poll, the Centre was expected to peg its gross borrowings at Rs 15.5 lakh crore for the next financial year and net borrowing at Rs 11.7 lakh crore.
The increase in the gross borrowing has partly been necessitated by the fact that the Centre has bonds worth Rs 4.4 lakh crore maturing in 2023-24, according to RBI data as of January 30. This is 41 percent higher than the redemptions it faced this year.
The government's borrowing is among the most important determinants of interest rates in the economy. Higher-than-expected government borrowings can push up rates for all bond issuers – sovereign and corporate – while interest rates can decline if the government tightens its belt and borrows less than anticipated.
Given the size of the borrowing programme, markets expect the RBI to step in sometime during 2023-24 and support the government bond market by way of open market purchases of bonds.
This measure involves the central bank purchasing bonds from private players, which infuses additional liquidity and props up bond yields.
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