Fiscal deficit target under pressure: Centre to borrow Rs 50,000 crore more via G-secs in Jan-Mar

“The Government will raise additional market borrowings of Rs 50,000 crore only in fiscal FY18 through dated government securities. The government will thus, between now and March 2018, not be raising any net additional borrowing,” the ministry said. The government had pegged the fiscal deficit target of Rs 3.2 per cent of the GDP for the current fiscal. Additional borrowing by the government may have impact on the fiscal math. Since the revenue collection from the Goods and Services Tax (GST) is slightly lower than the expected in the last two months, the additional borrowing would help bridge the shortfall.

“While the upward revision in the Government of India’s dated issuance calendar for January-February 2018 is being offset by the reduction in the planned T bills issuance, concerns regarding a mild fiscal slippage persist on account of the sequential dip in GST collections for November 2017. The risk of a slippage relative to the fiscal deficit target for FY2018 stems primarily from the growing likelihood that tax revenues, dividends and inflows from other communication services would undershoot the budgeted level,” said Aditi Nayar, Principal Economist at rating agency ICRA.

The GST collections slipped to their lowest level in November as rates were cut on dozens of goods. Total collections under the GST for the month of November slipped for the second straight month to Rs 80,808 crore, down from Rs 83,346 crore in October and Rs 95,131 crore in September. Given the clouded outlook for revenues, sticking to the fiscal consolidation roadmap would entail compression of expenditure, which would dampen the expected economic growth recovery in fourth quarter of the current fiscal year, Nayar said.

Yield on 10-year benchmark government bond closed at 7.21 per cent on Wednesday. Yields on the benchmark bonds have surged nearly 80 basis points since July and analysts expect it to go up further if the government is unable to stick to its fiscal deficit target. India’s fiscal deficit for April to October period has already reached 96.1 per cent of the target for the year to March. The recent rise in international crude prices only adds to concerns relating to fiscal deficit.

In the Budget for 2017-18, gross and net market borrowing were pegged at Rs 5.80 lakh crore and Rs 4.23 lakh crore respectively with Rs 3.48 lakh crore being raised (net) from dated Government securities and Rs 2,002 crore from T-bills, the finance ministry said. As against the budgeted net T-bills receipt of Rs 2,002 crore, net collections till December 26 2017 are Rs 86,203 crore, it said.

“Borrowings in FY18 till date (Dec. 26, 2017) have been conducted in line with the borrowing calendar for FY18. Gross and net market borrowings in FY 18 till December 26, 2017 are Rs 5,21,000 crore and Rs 3,81,281 crore, excluding buyback/switches, respectively,” the ministry said. The borrowing would be Rs 15,000 crore each last five weekly auctions of this fiscal ending on February 9, 2018. The revised T-Bill borrowing will be Rs 14,000 crore each in first 13 weeks of 2018 ending on March 28.