Centre plans to raise additional ₹50,000 cr. via bond sales in the fourth quarter, to trim collections via T-bills to ₹25,006 cr.

The Centre has decided to borrow an additional ₹50,000 crore in the last three months of this financial year, a move that some economists said could result in the government missing its budgeted fiscal deficit target of 3.2% of GDP.

Announcing the borrowing calendar for the fourth quarter, the Finance Ministry on Wednesday said that the additional borrowing, which would be done through government bonds, would, however, be offset by trimming T-Bills (treasury bills) from ₹86,203 crore to ₹25,006 crore.

“The borrowing programme of the Government of India has been reviewed, with RBI, and following decisions taken: (i) The Government will trim down the T-Bills from present collections of ₹86,203 crore to ₹25,006 crore by March end, 2018. (ii) The Government will raise additional market borrowings of ₹50,000 crore only in fiscal FY18 through dated government securities. (iii) The Government will thus, between now and March 2018, not be raising any net additional borrowing (T-Bills will be run down by ₹61,203 crore and additional G-Sec borrowing will be ₹50,000 crore).”

In the Union Budget, the government had factored gross and net market borrowing at ₹5,80,000 crore and ₹4,23,226 crore respectively, with ₹3,48,226 crore proposed to be raised (net) from bonds and ₹2,002 crore from T-bills.

Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India said, “In my estimates, fiscal deficit for the current financial year could be 3.5%. Given the uncertainties on the external front, GST collection, revenue collection etc, 3.5% fiscal deficit looks imminent. That is the impact we are getting due to the increased borrowing numbers.”

‘Could hit consolidation’

Any slippage from the fiscal deficit target this year, could have a knock-on effect on the overall fiscal consolidation efforts, according to Mr. Ghosh.

“Most importantly, this should also alter the fiscal consolidation path,” Mr. Ghosh said. “So, if this year’s fiscal deficit is 3.5% or higher, next year’s deficit should also stay close to that. Because, the government may not want to go for an aggressive consolidation in an election year since it needs to spend more to push growth, which is still picking up.”

The Finance Ministry said borrowings had so far been “in line”, suggesting the government doesn’t apprehend significant fiscal slippage.

“Borrowings in FY 18 till date (December 26, 2017) have been conducted in line with the borrowing calendar for FY18. Gross and net market borrowings in FY18 till December 26, 2017, are ₹5,21,000 crore and ₹3,81,281 crore, excluding buyback/switches, respectively. As against the budgeted net T-bills receipt of ₹2,002 crore in FY18, net collections till December 26, 2017, are ₹86,203 crore.”

Another factor that would come into play next year, Mr. Ghosh said, was that the deficit would be on the basis of a larger GDP number.