Govt to borrow Rs 4.34 lakh crore in next six months

The Finance Ministry has announced that it will be borrowing an amount of Rs 4.34 lakh crore to meet its expenditure as per the revised borrowing plan announced in May this year. In order to bring certainty to the market, the Centre, in consultation with the Reserve Bank of India, announces its borrowing calendar in advance so that other stakeholders can also plan accordingly.

New Delhi:The Finance Ministry Wednesday said that it will borrow Rs 4.34 lakh crore in the second half (October-March) of the current financial year to meet its expenditure as per the revised borrowing plan announced in May this year.

In her first full budget presented in February this year, finance minister Nirmala Sitharaman estimated this year’s borrowing to be Rs 7.8 lakh crore but the outbreak of Covid-19 global pandemic changed all that. It forced the government to raise the yearly borrowing by over 50 per cent, from Rs 7.8 lakh crore to Rs 12 lakh crore as it is required to spend more to mitigate the adverse impact of Covid-19 pandemic at a time of a sharp decline in the revenue collection.

Economic Affairs Secretary Tarun Bajaj said the government would not go beyond the revised borrowing target of Rs 12 lakh crore in this fiscal. He also confirmed that the government has already borrowed Rs 7.66 lakh crore in the first six months of the current financial year.

The massive borrowing by the government has a direct impact on the market and interest rates as it may crowd out the space for private borrowers like the corporate sector, SMEs and retail borrowers.

In order to bring certainty to the market, the Centre, in consultation with the Reserve Bank of India, announces its borrowing calendar in advance so that other stakeholders can also plan accordingly.

This year, the total borrowing by both the Centre and States are expected to go up by Rs 8-10 lakh crore as the Centre has also relaxed the cap on the borrowing by States, which has opened a window of an additional borrowing of over Rs 4 lakh crore by States.

In addition to this, the Centre also asked States to borrow to meet any shortfall in their revenue collection due to the implementation of GST as it expressed its inability to pay constitutionally guaranteed GST compensation dues in this fiscal.

It may also add an additional borrowing of Rs 1-2 lakh crore by States this year.

However, the banking sector experts have ruled out that this additional borrowing will crowd out the space for the private sector.

In an earlier interaction with ETV Bharat, Upasna Bhardwaj, Senior Economist and Senior Vice President of Kotak Mahindra Bank, said that huge borrowing by the Government will not lead to a shortfall of liquidity for the private sector as Indian Banks have ample liquidity in the system.