The Union government may borrow Rs 20,000 crore less from the market than the budgeted target of Rs 5.69 lakh crore in 2012-13, expecting a better cash balance this time. As the borrowing target for next year is 36 per cent higher than this year’s, this would be a marginal relief to the private sector, which fears crowding out of resources.
“We need a cash balance of about Rs 50,000 crore at the end of next fiscal. Our borrowings may come down by Rs 20,000 crore next year,” a senior finance ministry official said.
Officials of the ministry and the Reserve Bank of India are likely to meet on Tuesday to finalise a borrowing calendar for the first half of the next financial year.
The government’s market borrowings are likely to be front-loaded next year, as a large chunk of the non-tax revenue the government is expecting from sale of telecom spectrum (about Rs 40,000 crore) will not come before January. Tax collections may pick up pace only towards the end of 2012-13, as economic growth gains momentum.
In the past, too, the government had preferred to front-load its market borrowing.
However, doing so did not mean much in 2011-12, as the government raised its borrowings by around 22 per cent from the Rs 4.17 lakh crore in the Budget estimates to Rs 5.1 lakh crore. Deposits in small savings had dwindled due to the high interest rate regime, marring its chances of receiving loans from a fund comprising these savings. Subsidies had also surged.
The target for 2012-13 is Rs 5.69 lakh crore. Net market borrowings are also projected to increase from Rs 4.36 lakh crore this year to Rs 4.79 lakh crore next year.
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In a recent interview, department of economic affairs secretary R Gopalan told Business Standard the government might not borrow the entire money next year. He said the borrowing target was on a slightly higher side, but the government would be reducing it.
The huge programme is a cause of worry for the private sector, which fears it would continue to crowd out their investments and keep interest rates high.