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Government plans to borrow extra Rs 50,000 crore in Jan-March

Government plans to borrow extra Rs 50,000 crore in Jan-March

The central government is set to borrow Rs 50,000 crore extra through long-term securities from the markets, over and above the budget estimate of Rs 5.80 lakh crore for fiscal year 2017-18. This means it will now breach its fiscal deficit target for the year of 3.2 per cent of gross domestic product. All other things being equal, fiscal deficit for the year could be 3.5 per cent of GDP.

A top government official confirmed that the Centre was set to borrow more, in the light of lower than expected revenue proceeds from the goods and service tax (GST) and non-tax revenue items like dividends from state-owned companies. An official statement from the finance ministry later confirmed that Rs 50,000 crore worth of additional government securities (G-Secs) would be issued in the January-March quarter.

The finance ministry said there will not be any net additional borrowing in the third quarter. Treasury Bills (T-Bills)will be run down by Rs 61,203 crore and additional borrowing through government securities will be Rs 50,000 crore, the ministry said in a statement.

Experts said while the extra borrowing raises fiscal concerns, the market had already pencilled in a deficit of about 3.5% of GDP against the budgeted target of 3.2% of GDP.

“The government will raise additional market borrowings of Rs 50,000 crore only in fiscal FY18 through dated government securities,” the finance ministry said.

Any slippage this year means that the expected target for the next year, of 3 per cent of GDP, will not be adhered to, either. Finance Minister Arun Jaitley could use that extra spending room in what will be the Narendra Modi government’s last full Budget before the 2019 general elections.

On the revenue side, there are several concerns. There could be a tax revenue shortfall of Rs 20,000 crore due to a revision in GST rates, Bihar Deputy Chief Minister Sushil Modi said in the last GST Council meeting in Guwahati. However, central government officials maintain that was Sushil Modi’s views and any shortfall could be offset by greater compliance and an increase in demand. They say a clarity on the matter would emerge later.

Also, the Reserve Bank of India (RBI) has this year paid the Centre a surplus of Rs 30,600 crore. The Centre said it was expecting around Rs 43,000 crore. There is no certainty that the RBI would pay an extra amount or not. There is also a concern that state-run companies, having been told to spend more in capital expenditure, as well as buy back shares, might not be able to cough up the dividend expected of them.

The only silver lining, meanwhile, seems to be disinvestment, which could garner proceeds of above Rs 90,000 crore, compared with the budget estimate of Rs 72,500 crore.