MUMBAI: The government has borrowed from the National Small Savings Fund (NSSF) in FY19, but such borrowing runs the risk of understating the fiscal deficit, a report said on Wednesday.
The government has borrowed Rs 500 billion from the NSSF, and its total borrowings have reached Rs 1,420 billion, or 22.4 per cent of the budgeted fiscal deficit in FY19, India Ratings said.
It also said that the GDP growth in December quarter will slow down to 6.9 percent.
Comparing the borrowings to the bonds issued during the last decade, it said the liabilities are listed on the balance sheets of state-run enterprises instead of the government’s accounts.
“Keeping such liabilities outside the government accounts understates the fiscal deficit/GDP and debt/GDP ratio,” the agency said.
Figures released on Tuesday said the government has over-shot the FY19 fiscal deficit target by 21 per cent. The Finance Ministry has said that there will be a 0.1 percentage point slippage in the gap and exuded confidence in getting the fiscal deficit at 3.4 per cent for FY19.
The rating agency said there can be positives as well through the excess borrowings from NSSF, especially easing pressure on the benchmark 10-yr G-sec yield and keeping the cost of government borrowings through extra budgetary resources (EBR) low.
Extra budgetary resources are the financial liabilities raised by public sector undertakings, for which repayments are made using the union government budget, it said.
If the borrowings classified as EBR are included, the gross borrowings will be higher.