 "economy, coronavirus, borrowing, revenue, growth")
The Centre has reserved the option of reducing its market borrowing in the second half (October-March) of FY24 with robust small savings collections, government sources said on Wednesday.
On Tuesday, the finance ministry stuck to its market borrowing plan of Rs 6.55 trillion in the second half (October-March) of FY24, brushing aside pressure from tepid revenue growth and rising subsidy burden in the pre-election year.
“We are retaining our fire power. This is a matter that we will keep on looking at as we progress. We are still on target with small savings. It affords more flexibility to the government,” the senior official said.
The surge in net collections from small savings had raised expectations of reduced dependence on market borrowings. For the first quarter of the current financial year, the net collections under the small savings fund have witnessed a growth of over 48 per cent compared to the corresponding period last year, during which the increase was around 9.9 per cent.
Sources have indicated that with 40 per cent of the budgeted capital expenditure incurred by early September and overall receipts on track to meet FY24 Budget target, the government is confident of meeting the 5.9 per cent fiscal deficit target for the current fiscal year.
Rating agency India-Ratings in its report a week ago had said that the government would find it challenging to meet the FY24 fiscal deficit target since gross tax collection growth had been just 2.8 per cent for the first four months of FY24 and yet the government had continued its capital expenditure.
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The net borrowings of the government for October-March period is pegged at Rs 3.74 trillion. This includes repayment of Rs 2.81 trillion. Finance ministry sources said that most of this repayment would be met through compensation cess receipts and no extra borrowing would be required. This would take the net borrowing upwards of Rs 4 trillion for the first half of this financial year.
The senior official said it had also been a conscious decision of the government to taper treasury bills in the third quarter so that it didn’t increase gross borrowing. “It is indicative of our comfortable cash position,” he added.
The government will also issue Treasury bills (T-bill) worth Rs 3.12 trillion in the third quarter of FY24. Each of these weekly T-bill auctions will be to the tune of Rs 24,000 crore. “The 91-day T-bill issuances in October-December period would be lower to limit redemption pressure in January-March,” the senior official said.
Finance ministry is expecting a better Greenium, or green premium, from green bonds which will be of three maturities: Rs 5,000 crore each of 5-year and 10-year tenures; and Rs 10,000 crore of 30-year tenure. “There is massive investment in the environment and it is a great opportunity for long-term engagement in the Indian market. This time we have also told in advance when we would be issuing the green bonds,” the senior official added.
While there are concerns around the recent run-up in oil prices as highlighted in August's monthly economic review, finance ministry sources said that the oil prices would not impact budget calculations. Monthlong discussion with various ministries on the interim budget for 2024-25 would start from October 10.
