The Centre on Wednesday said it would borrow Rs 7.24 lakh crore (trillion) in the first half of 2021-22 which is 60 per cent of the total gross borrowing of Rs 12.05 lakh crore for the fiscal, in line with its previous strategy to mop up the bulk of its requirements in the first half of the fiscal (frontloading).
The announcement came on a day data showed India’s fiscal deficit at the end of February to be 76 per cent of the revised estimate, an indication that it is likely to remain within the projections made by finance minister Nirmala Sitharaman last month. Sitharaman had revised upwards the fiscal deficit projection for 2020-21 to Rs 18.48 lakh crore or 9.5 per cent of the gross domestic product (GDP) from the original budget estimate of Rs 7.96 lakh crore or 3.5 per cent of GDP.
The Reserve Bank of India (RBI) on Wednesday set the Ways and Means Advances (WMA) limit at Rs 1.2 lakh crore for the central government for the first half of the financial year beginning April 1. WMAs are temporary advances given by the RBI to the government to tide over any mismatch in receipts and payments.
With the fiscal deficit lower than the revised target, the government is set to start 2021-22 with a comfortable cash balance, Aditi Nayar, principal economist, Icra said.
“Accordingly, even though the government of India has chosen to frontload its borrowing programme, with 60 per cent of the amount to be raised in the first half, this works out to a 5.5 per cent decline relative to its market borrowings in the first half of 2020-21,’’ she said.
She said a large supply of dated government securities and state development loans are expected in the coming months which will jack up yields in the absence of sizeable and frequent open market operations along with the possible firming of global interest rates. “In our view, the benchmark 10 year G-sec yield may harden to as much as 6.35 per cent by the end of the first quarter of 2021-22.’’ The yields of the benchmark 10-year security on Wednesday closed at 6.16 per cent.
According to its borrowing calendar, the government will raise money through securities ranging from 2 years to 40 years with fixed interest rates along with floating rate bonds. In April alone, the Centre will raise Rs 1.16 lakh crore.
Current account deficit
Data from the RBI showed the balance on the current account recorded a deficit of $1.7 billion or 0.2 per cent of the gross domestic product (GDP) in the third quarter of 2020-21 after a surplus of $15.1 billion or 2.4 per cent of GDP in previous quarter and $19 billion (3.7 per cent of GDP) in the first quarter.
Amnesty plan ends
The deadline for filing declaration under the direct tax dispute resolution scheme Vivad se Vishwas ended on Wednesday.
The tax department had last month extended the last date for filing a declaration and making payment till March 31 and April 30, respectively.
