Budget 2019-20: There won’t be any significant change in the government’s borrowing for FY 2019-20 as the government wouldn’t like to disturb the sovereign yield.
India Union Budget 2019: There won’t be any significant change in the government’s borrowing for FY 2019-20 as the government wouldn’t like to disturb the sovereign yield. The yields have been trading at a considerable premium over the repo rate. The large part of the risk has already been priced in, there may be a little bit of steepening of the curve with ten basis points slippage in the fiscal deficit, Saurabh Bhatia, fund manager-fixed income, DSP Investment Managers said in an interaction with ET Now.
There may be a marginal slip in the fiscal deficit target by 10 basis points, going by the market perception, said Bhatia, adding that he expects continuation in the numbers from the interim budget which was at 3.4 per cent of the GDP as the shortfall in revenue can be bridged with the three or four measures.
“Yes there has been a shortfall in the revenue and challenges and it has been a tight-rope walk, considering there is not much room to expand the expenditure and the revenues do look a lot more optimistic but the shortfall in GST and direct taxes to certain extent can be bridged by extending the subsidies into next year and partly increasing the divestment target which can partly offset the overall shortfall in the tax collections and hence keep the number at 3.4 per cent.
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The interim budget of February 2019 had earmarked the Centre’s net market borrowing at Rs 4.73 lakh crore for FY20 as compared with the revised estimate of Rs 4.23 lakh crore for the last fiscal, while the gross borrowing for the whole year was at Rs 7.1 lakh crore.
The government may probably dip into the NSSF savings, as the government has demonstrated earlier also, said Gupta. On Wednesday, the benchmark 10-year yield plunged marginally by one basis points to end at 6.83%. The dependence on NSSF has only increased in recent years. NSSF funds financed 19.7% of fiscal deficit in FY19 as against 1.8% in FY13, and are budgeted to contribute 18.5% of the deficit in FY20.