The government will borrow an additional Rs 50,000 Crore from the market for the remaining time of the current fiscal year. It seems that the government will not be able to achieve the fiscal deficit target set for the current financial year. The plan to raise additional borrowings from the market has ensured that the government will not cut spending in order to achieve the fiscal deficit target. Economic recovery will be a problem if the path to spending gets cut.
According to the statement issued by the Finance Ministry, there will be no additional borrowings in the third quarter. The finance ministry has said that the size of the Treasury bill will be reduced by Rs 61,203 Crore and additional borrowings of Rs 50,000 Crore will be raised through G-sec. Experts say that the additional borrowing of the government may increase the concern about the fiscal deficit, which the market has already considered that it could be around 3.5 percent against the GDP of 3.2 percent of the target.
The government will raise Rs 93,000 Crore instead of Rs 43,000 Crore from long-term securities in the budget set for the current fiscal. The finance ministry said, “The government will raise additional funds of Rs 50,000 Crore through long-term securities in the fiscal year 2018.” In this regard, HDFC Bank’s Chief Economist, Abheek Barua said, “Government is giving an adequate indication that it will violate the deficit target. You have already borrowed so much, so there is no problem in getting it missed. In the current financial year, slippage of 0.2 percent is possible.
With the recent decline in GST revenue and low dividend given by the RBI, the risk of increasing the fiscal deficit has increased due to non-tax revenue collection estimates. Also, there is no hope of getting more than the spectrum auction this year.
Adi Nair, a principal economist of ICRA, said, “The impact of the increase in the number of funds raised by the government for long-term securities during January–February 2018 can be reduced by lessening the planned interest in the Treasury Bill Issues. But the continuous decline in GST collection in November 2017 has led to the risk of a fiscal shortfall going up.” It was reported that a significant section of the government does not want to cut the expense, as it will cause problems in growth recovery. India’s GDP growth was 6.3 percent in the September quarter, while the economic growth in the June quarter fell to three years low of 5.7 percent. – Finance Exchange