New Delhi: The government plans to borrow Rs 2.08 lakh crore in the second half of fiscal 2017-18 to finance its fiscal deficit, a number in line with the budget outlay.
The Economic Affairs Secretary announced the second half borrowings calendar on Thursday and added that any additional demand for grants would require extra borrowing over and above the budgeted number.
This is an indication that the government expects a spike in spending later in the year and is laying the ground for extra borrowings.
Markets tend to get spooked when the government exceeds its borrowing limit and the statement by the DEA secretary was meant to calm markets.
The economy is currently undergoing a slowdown and GDP declined to a 3-year low of 5.7%. Many economists are calling on the government to increase its spending to counter the slowdown. Which means the government will have to exceed its borrowing limit.
Arun Jaitley set a target for the fiscal deficit at 3.2% for the fiscal and the borrowings are meant to finance this. However, countering the slowdown will mean exceeding this target. Most analysts have said that the government could go up to 3.5%.
Government's raise the money by issuing bonds of different maturities on the open market which are purchased by banks, pension funds, LIC, and mutual funds. In fact, Indian sovereign debt has become attractive since yields on G-secs have hardened.
Even retail investors are putting money in debt mutual funds.
Indian bond prices will be affected tomorrow when the bond markets open on news of a possible overshoot of the borrowings target.
Comments
0 comment