Govt borrowing: What it means for the economy
NEW DELHI : The central government on Tuesday announced that it will borrow ₹6.55 trillion during the second half of the ongoing fiscal year, keeping its borrowing plans unchanged. Mint explains the relevance of this for the Indian economy. The central government will borrow ₹6.55 trillion during the second half of the ongoing fiscal year, which comprises 42.45% of its gross market borrowing of ₹15.43 trillion for the full year.
The borrowing for FY24 will be done through dated securities. The borrowing in the second half of the year will be completed through 20 weekly auctions, spread over 3, 5, 7, 10, 14, 30, 40 and 50-year securities, with different shares. The Centre often front-loads its capital expenditure plans, which means borrowing more during the first half of the year, to maintain growth momentum.
Breaching the borrowing plan would have impacted the markets and bond yields. Sticking to the borrowing plan demonstrates fiscal prudence. This has a calming effect and reduces pressure on the markets.
This also indicates that there will be enough liquidity available in the markets, though at present there’s no shortfall of liquidity. The government’s 10-year bond yield was trading at 7.17% on Wednesday, up from 7.14% on Tuesday. According to some economists, while the government is unlikely to breach its borrowing outlook, its market borrowing could end up being lower than the budgeted amount.
The Centre can dip into small savings funds, like the National Small Saving Fund (NSSF), Senior Citizen Saving Scheme, etc., which have seen a surge in net collections. These collections have grown over 48% in Q1FY24, compared to the year-ago period. The increase in the net collections of small savings can help the Centre
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