Relief for private borrowers: Net govt borrowing seen back near pre-Covid levels by FY27

On the financing side, gross and net market borrowings for FY27 are budgeted at Rs 17.2 lakh crore (4.4 per cent of GDP) and Rs 11.7 lakh crore (3.0 per cent of GDP).

• Net government borrowings to fall to 3 percent of GDP by FY27
• Lower borrowings may boost private sector credit availability
• Government debt as a share of GDP is steadily declining

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Pointing to a decline in net government borrowings as a percentage of GDP, a monthly bulletin released by the Reserve Bank on Friday argued that it will facilitate greater availability of resources to the private sector.

The Union government's net market borrowings are budgeted to decline to 3 per cent of Gross Domestic Product (GDP) in FY27 as part of a gradual reduction towards pre-pandemic levels, the bulletin said.

It can be noted that the gross borrowing number of Rs 17.3 lakh crore was deemed higher than expectations by a section of people, which led to unease over the availability of resources for the private sector and was also blamed as one of the reasons for the sharp market correction on budget day.

RBI data showed that net market borrowings stood at Rs 4.73 lakh crore, or 2.4 per cent of GDP, in FY20 before the pandemic. They rose sharply to Rs 10.33 lakh crore (5.2 per cent of GDP) in FY21 amid elevated fiscal requirements, and remained above pre-COVID levels in the following years, at 4.1 per cent of GDP in FY23 and 3.9 per cent in FY24.

"The gradual reduction in the net market borrowing requirements (as per cent of GDP) of the Union government towards the pre-pandemic level is expected to facilitate greater availability of resources for the private sector," it said.

On the financing side, gross and net market borrowings for FY27 are budgeted at Rs 17.2 lakh crore (4.4 per cent of GDP) and Rs 11.7 lakh crore (3.0 per cent of GDP).

In 2024-25, net market borrowings were placed at Rs 11.63 lakh crore (3.5 per cent of GDP), and at Rs 11.32 lakh crore (3.2 per cent of GDP) in FY26 (RE). For FY27 (BE), they are budgeted at Rs 11.73 lakh crore, but lower at 3 per cent of GDP.

The bulletin said the gradual reduction in net market borrowing requirements as a share of GDP would help ease pressures on domestic financial markets. Lower incremental demand by the government for market funds could mitigate crowding-out risks, support liquidity conditions and enhance the availability of credit to the private sector.

Net market borrowings are estimated to finance 69.2 per cent of the gross fiscal deficit (GFD) in FY27 (BE) compared to 72.7 per cent of the GFD in FY26 (RE). As a percentage of GDP, the net market borrowings are budgeted to decline in FY27, the bulletin said.

Securities issued against small savings and net treasury bills, amounting to Rs 3.9 lakh crore and Rs 1.3 lakh crore, respectively, are budgeted to finance 22.8 per cent and 7.7 per cent of the GFD, respectively, in FY27.

The government's outstanding debt after peaking at 62.6 per cent of GDP in FY21 amid the COVID-19 pandemic, the total outstanding debt of the Union government has been recording a consistent decline, it added.