Market borrowing: Govt may announce H2 calendar on Wednesday

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September 29, 2020 1:45 AM

The government will likely release its borrowing calendar for the second half of this fiscal on Wednesday, an official source said.

Sources have said an acute resource crunch has prompted the government to keep alive plans to raise its gross market borrowing again in FY21, having already hiked it by 54% from the budgetted level to Rs 12 lakh crore.Sources have said an acute resource crunch has prompted the government to keep alive plans to raise its gross market borrowing again in FY21, having already hiked it by 54% from the budgetted level to Rs 12 lakh crore.

Analysts have told FE that the government may either keep its full-year target of Rs 12 lakh crore unchanged or resort to only “minor tinkering” on Wednesday. Instead, it may choose to tweak its borrowing plans for the second half substantially only by November, when it reassesses its finances for the revised estimates, based on the requirements to stimulate the economy.

The government borrowed Rs 7.36 lakh crore from the market until September 18, which was 81% higher than a year before and represented 61% of the revised, full-year market borrowing limit of Rs 12 lakh crore, showed the RBI data. On September 25, the RBI again auctioned government securities worth Rs 30,000 crore, taking the total so far this fiscal to Rs 7.66 lakh crore.

The analysts expect Wednesday’s borrowing announcement to factor in the government’s immediate relief plans, such as potential breather to borrowers on interest on interest during the repayment moratorium period, and its net cash outgo of Rs 1.67 lakh crore under the recently-approved supplementary demands for additional spending. The announcement may give some indication of the government’s upcoming fiscal stimulus plans as well.

Sources have said an acute resource crunch has prompted the government to keep alive plans to raise its gross market borrowing again in FY21, having already hiked it by 54% from the budgeted level to Rs 12 lakh crore. But any announcements to this effect would be “appropriately timed”, factoring in a precise assessment of the deficit level as well as market anxiety.

The government hasn’t junked the idea of deficit monetisation but that would be the last resort, given the already-elevated level of inflation and other associated risks, the source said. Its decision on deficit monetisation will determine the quantum of its additional market borrowing in the second half.

With net tax revenues declining 40% on year in April-July (the budgeted growth was 21% in FY21 over the actual of FY20), analysts see fiscal deficit even doubling from the budgeted target of Rs 8 lakh crore. The April-July fiscal deficit has already exceeded the budgeted target for the full year.

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