Govt sticks to fiscal 2018 borrowings plan, aims to raise ~1.65 trillion by Dec

The government will raise ~2.08 trillion through market borrowings in the second half of the current fiscal year, sticking to its budget, but does not rule out the possibility of selling more bonds for additional spending.

The majority of the borrowing would be completed by December, economic affairs secretary Subhash Chandra Garg said in a press briefing on Thursday. According to calendar released by the Reserve Bank of India, the government will raise ~1.65 trillion by the end of December.

Garg said the need for additional borrowing would be assessed in December once the supplementary demand for grants is placed in Parliament. He said the government was sticking to the fiscal deficit target of 3.2% of GDP “as of now.”

With economic growth sagging to a three-year low of 5.7% in the June quarter, debate about the merits of a fiscal stimulus has taken centre stage. In the 2017-18 Union budget, the government pegged its aggregate gross market borrowing at ~5.8 trillion.

It had front-loaded borrowings in the first half of the fiscal year when it raised ~3.72 trillion. Fiscal deficit reached ~5.05 trillion for April-July or 92.4% of the budgeted target for the current financial year, meaning there is little elbow room left for the government to boost spending without breaching the target.

According to Rupa Rege Nitsure, group chief economist at L&T Financial Services, by sticking to the borrowing numbers, the government has sent a positive signal and avoided negative implications on ratings.

“By December, they will have a better view of the revenue shortfall because currently there are some problems with GST,” Nitsure said. On Thursday, the RBI also notified that the limits for foreign portfolio investors for October-December increased by ~8,000 crore for government securities and ~6,200 crore in state development loans.