Govt pegs FY25 gross borrowing at Rs 14.13 lakh crore, sharply lower than expectations

Net market borrowings during 2024-25 is pegged at Rs 11.75 lakh crore.

The Centre will borrow Rs 14.13 lakh crore from the markets in 2024-25 in gross terms to finance its fiscal deficit of 5.1 percent of the GDP. This is a whopping Rs 1.3 lakh-crore lower compared to the estimate of Rs 15.43 lakh crore for the current fiscal, Finance Minister Nirmala Sitharaman announced in a speech presenting the Interim Budget for 2024-25.

However the net borrowing number for FY25 is only slightly lower at Rs 11.75 lakh crore compared to the revised estimate of Rs 11.80 lakh crore for the current financial year.

While, the Centre's gross borrowing number for FY25 is sharply lower than a Moneycontrol survey of economists that pegged it at Rs 15.2 lakh crore, net borrowing is projected higher than the expected figure of Rs 11.5 lakh crore.

In percentage terms, the Centre's gross borrowing is 8.4 percent lower than the FY24 figure, while for net borrowing the reduction is a much lower 0.4 percent compared to the current fiscal's figure.

As a percentage of GDP, the Gross and Net borrowing are expected to go down to 4.3 percent and 3.6 percent, respectively as per the Budget estimate of 2023-24 from 5.2 percent and 4.0 percent, respectively, in the revised estimate of FY24.

The sharply lower gross borrowing figure for FY25 is a result of the central government's focus on aggressive consolidation evident in the huge 70 basis points cut in the fiscal deficit target for the next fiscal compared to 5.8 percent in FY24.

The borrowing number is key since the central government finances its fiscal deficit mainly through issuing dated securities. Bond markets cheered the surprisingly lower-than-expected borrowing figure for FY25. Yield on the benchmark 10-year government security fell by around 8 basis points on February 1 after Sitharaman announced the gross borrowing for the next financial year while delivering her speech for the Interim Budget.

Other sources of financing the fiscal deficit includes borrowings from National Small Savings Fund (NSSF), which is estimated at about Rs 4.66 lakh crore for the next fiscal. Of the total financing of the fiscal gap, the share of net market borrowings and NSSF is 69.7 percent and 27.7 percent, respectively, in FY25.