Govt unlikely to curtail borrowing programme for FY16

Move by the Centre is aimed at keeping its public spending high in order to keep the growth engines running

The government has decided not to cut its annual borrowing this fiscal as it wants to keep public spending high in order to keep growth engines running.

“We will continue the borrowing programme as per the target and there is no proposal to cut,” official sources said.

Government has decided to keep public expenditure high as private investment is not picking up, sources said, adding that the major thrust of government expenditure is on infrastructure development.

The government, as per the Budget papers, planned to borrow a total of Rs 6.01 lakh crore from the market this fiscal. It had already borrowed about Rs 3.5 lakh crore in the first half of the financial year, which is over 50 % of the annual target.

In the second half (October-March), it plans to raise Rs 2.49 lakh crore through market borrowings.

The net borrowings in 2015-16 are pegged at Rs 4.56 lakh crore, after considering repayments of past loans and interest.

The government borrows money from the market through treasury bills and other instruments to fund its fiscal deficit.

The government had borrowed Rs 5.92 lakh crore in 2014-15.

The Centre plans to reduce the deficit to 3.9 % of GDP this fiscal from 4 % last fiscal despite expected shortfall in direct taxes and lower disinvestment proceeds.

Although the government has targeted to raise Rs 69,500 crore from PSU disinvestment in current fiscal, so far only Rs 12,700 crore has been raised. The likelihood of any major stake sale in the remaining three months of 2015-16 is bleak.

Finance ministry officials have admitted that there would be a shortfall of around Rs 50,000 crore in disinvestment proceeds and about Rs 30,000-40,000 crore in direct taxes, but expressed optimism that higher realisation from indirect taxes as well as non-tax revenues will make up for the deficit.