How inflation could rescue the govt's fiscal deficit act in FY22

The surging inflation will be welcome news for the finance ministry as it seeks to come close to achieving the fiscal deficit target for FY22. The good news will persist even though the rising rates have begun to push up the cost of government borrowing.

“The average cost of borrowing by the Centre will not move much this financial year,” said Pinaki Chakraborty, Director, National Institute of Public Finance and Policy. The weighted average borrowing cost for FY21 was 5.79 per cent, which was the lowest in the past 17 years and the weighted average maturity was 14.49 years, according to finance ministry data.

The combined state and central government deficit is also expected to moderate. An India Ratings report