NEW DELHI:To ease the pressure on the local debt market, government has reduced its borrowing target to Rs 2.88 lakh crore for the first half of 2018-19, less than what it borrowed last year and would use larger inflows from small savings schemes to fund its fiscal deficit.
Government borrowed Rs 3.72 lakh crore, in the same period of FY18 in the last year in the same period.
“This makes 47.5 per cent of the total budgeted amount as against 60-65 per cent share in this period in previous years,” Economic Affairs Secretary Subhash Chandra Garg told the media. He also added that government’s gross market borrowing in FY19 is “likely to be lower by Rs 250 billion than the budgeted target”.
The Central government uses its benchmark bond scheme, government securities or G-secs to raise funds from the open markets.According to Garg, this would lead to lower overall borrowings compared to the budgeted amount. The government has budgeted gross G-sec borrowing of about Rs 605,539 crore for FY19.He also added that government’s gross market borrowing in FY19 is “likely to be lower by Rs 250 billion than the budgeted target”.
However economists say that one of the reasons for the change in the borrowing calendar is the lack of demand for government paper from banks, which have been hit by losses on their bond portfolios.
Government will rather use larger inflows from small saving funds to fund fiscal deficit in the next fiscal year.“The government intends to use larger inflows from Small Savings Schemes to fund its fiscal deficit during the year. The government will borrow Rs 1 lakh crore from NSSF as against budgeted amount of Rs 75,000 crore,” Finance Ministry said in a statement.
The government also plans to issue more Floating Rate Bonds (FRBs) and introduce CPI linked bonds, both put together, to the extent of 10 per cent of issuances during the year.The government will also introduce two benchmarks during this half year — 2-year and 5-year— to meet the market demand, he added.
“More issuance will be planned in short and long-term maturity bucket, reducing the issuance in medium term segments of 10-14 years to around 29 per cent, as against more than 50 per cent issuances in previous years,” Garg said.The government and the central bank are also considering a plan to raise the foreign investment limit in government bonds.He said that the government expects additional dividend from Reserve Bank of India this week.