Cost of borrowing to be reasonable; yields expected at around FY21 level: DEA Secretary

Source: Twitter

The government will borrow about Rs 12 lakh crore for the next fiscal year at a reasonable rate, Economic Affairs Secretary Tarun Bajaj said expressing hope that the yield would be around the current year’s level.

He said that the government will ensure its record borrowing programme for 2021-22 doesn’t crowd out the private sector if credit demand picks up.

Due to the ample liquidity in the market, the cost of borrowing for the government declined during the 2020-21.

Despite large borrowing programme of Rs 12.80 lakh crore for the government, the cost of fund has been 80-100 basis points lower than the previous fiscal year.

Average yield in the first half of 2020-21 was 5.82 percent.

This is nearly 1 percentage point lower than the average yield in the previous financial year.

During 2019-20, the average yield for the government borrowing was 6.58 percent.

Even the latest 10-year G-Sec bond auction bear a coupon rate of 5.85 per cent.

For the coming year, the Secretary in the Department of Economic Affairs (DEA) said "rates would be reasonable…it would be at the current level. May be 5-10 basis points here or there.”

Besides market borrowing, he said, there are other alternatives before the government including the National Social Security Fund (NSSF) and multilateral agencies.

"If private sector needs come up, we will be happy to create space for them,” he told