The Centre will borrow Rs 5.03 lakh crore in the second half (October-March) of 2021-22, and will stick to the Rs 12.05 lakh crore borrowing target for the year in spite of absorbing additional loans in lieu of goods and service tax compensation shortfall to states.
During the first half, the government borrowed Rs 7.02 lakh crore through securities or G-Secs, the Finance Ministry said in a statement on September 27.
"Out of gross market borrowing of Rs 12.05 lakh crore projected for FY 2021-22 in the Union Budget, Rs 7.24 lakh crore (60 percent) was planned to be borrowed in first half. The effective borrowing was Rs 7.02 lakh crore," it said.
The statement said that H2 projection also factored in requirements for the release of the balance amount to states on account of back-to-back loan facility in lieu of GST compensation during the year.
According to the 2021-22 Union Budget, the government's gross borrowing was estimated at Rs 12.05 lakh crore, while net borrowing was pegged at Rs 9.37 lakh crore in the financial year beginning April 1.
"The Centre's H2 FY2022 borrowing calendar has provided a positive surprise, as while the amount is in line with the budget, it has absorbed the back-to-back GST compensation loan to be provided to the states," said Aditi Nayar, Chief Economist with ICRA Ltd.
Nayar said this implied that the Centre's fiscal deficit for the year will be around Rs 1.6 lakh crore lower than the budget estimate of Rs 15.07 lakh crore despite the modest rise in expenditure, a clear confirmation of the revenue upturn that is underway.
"This also suggests that the disinvestment programme is assessed to be on track. Based on the borrowing calendar, we expect G-sec yields to open gap-down by at least 10 basis points. The 10-year G-sec yield is likely to range between 6.0 and 6.2 percent in the coming quarter, with rising crude oil prices to counteract the benign borrowing figures," she said.
This year, the Centre is expected to borrow and transfer Rs 1.59 lakh crore to states in lieu of GST compensation. Out of that amount, Rs 75,000 crore has already been borrowed and transferred to states.
In its statement, the Finance Ministry said that G-Secs will be issued in 21 weekly tranches. All weekly issuances except one will be Rs 24,000 crore. "Borrowing will be spread under 2, 5, 10, 14, 30 and 40 year-securities and floating rate bonds (tenor of 7-8 & 13 years)," it said.
For 2021-22, Finance Minister Nirmala Sitharaman has budgeted a fiscal deficit target of 6.8 percent of nominal gross domestic product. The fiscal deficit for 2020-21 was revised to Rs 18.49 lakh crore, or 9.5 percent of GDP, from a budget target of 7.96 lakh crore or 3.5 percent of GDP.
As Moneycontrol had reported, officials are confident that in spite of higher-than-budgeted expenditure commitments, the Centre’s fiscal position is ‘more than comfortable’ and that the budget target will be met due to strong tax revenue proceeds.
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