The government’s finances are really not matching up to earlier expectations. This financial year, the Centre is set to go for market borrowings of over Rs 5 lakh crore, the highest ever.
After increasing market borrowings by Rs 52,872 crore this financial year, the finance ministry on Friday decided to enhance the mop-up again, this time by Rs 40,000crore. This means the government would borrow around Rs 93,000 crore more from the market than what was estimated in the Budget. The additional market borrowings also amount to over one per cent of India’s gross domestic product (GDP).
The government had pegged gross market borrowings at Rs 4.17 lakh crore in Budget 2011-12. In September, the government said it would borrow Rs 52,800 crore more to meet its expenditure requirements in the second half of the year, taking the total borrowing to Rs 4.7 lakh crore. This was largely because of low cash balance and a dip in collections from small savings schemes.
Now, the total borrowings would rise to a whopping Rs 5.10 lakh crore, roughly around 14 per cent of the revised estimates for borrowings in the last financial year. The need for higher borrowings arose because the government is expected to record a higher fiscal deficit, against the target of 4.6 per cent of GDP this financial year.
Analysts feel this sort of borrowing may exert pressure on the resources available for private investment, though the demand for investment is currently not much.
On Monday, the finance ministry had modified its borrowing calendar and said it would borrow Rs 15,000 crore on December 30. This was partly due to the cancellation of an auction of government borrowings of Rs 4,000 crore. However, this was just a preponement of the borrowing schedule, not an increase in it.
The government’s higher market borrowing is inevitable, as it is in dire need of funds to meet its expenditure needs, especially at a time when its outlook on revenue receipts looks gloomy.
Tax receipts in the first eight months of the year are only about 52 per cent of the Budget Estimate. Proceeds from disinvestment are only at Rs 1,144 crore, against Rs 40,000 crore projected in the Budget.
On the expenditure side, the government’s subsidy bill on petroleum, food and fertiliser is likely to rise by Rs 1 lakh crore over the earmarked amount of Rs 1.34 lakh crore.