Govt sticks to borrowing plan, to raise ₹2.68 lakh crore in H2
The government stuck to its gross borrowing target for the second half of this fiscal at ₹2.68 lakh crore despite an expected revenue shortfall because of cuts in corporate taxes earlier in September.
The finance ministry had front-loaded its borrowing and has completed the sale of bonds worth ₹4.42 lakh crore during April-September period or 62.25% of the full-year target of ₹7.1 lakh crore. The balance 37.75% will be borrowed from the market in the second half of the year through March 31 over 17 weekly auctions.
Speaking to reporters, economic affairs secretary Atanu Chakraborty said the government is sticking to the fiscal glide path as mentioned in the budget. “This has been decided after careful deliberation on inflows and outflows,” he added.
On the status of overseas sovereign borrowing announced in the budget, Chakraborty said the need for issuing sovereign bonds is decided keeping many factors into consideration including current price, market appetite, market condition and the related issue of structuring of the bond itself. “They need very careful calibrations and deliberations before one enters the market. Work on that is presently going on to work out a proper structure, looking at various pros and cons. It is a process which is long and will continue. For this year, all the borrowings presently are in rupee-denominated bonds,” he added.
In a big bonanza to corporate India, on September 20, finance minister Nirmala Sitharaman announced that manufacturing companies that are not availing tax sops can opt for a 22% corporate tax rate, while new manufacturing companies that register and start production between October 1 and March 2023 can avail of an even lower tax rate of 15%.
With the government decision, the effective tax rate, including cess and surcharges, for existing companies has fallen from 34.94% to 25.17%, while for new companies, it has dropped from 29.12% to 17.01%.
Aditi Nayar, principal economist at credit rating firm Icra Ltd, said based on the tax collections till August as well as the government’s estimate of the revenue loss related to the corporate tax cut, it expects a shortfall relative to the budgeted target for FY20 for the government’s tax revenue. “The extent of the shortfall in the government’s tax revenues relative to the budget estimate for FY20 would become clearer by the end of the third quarter, both in terms of corporate tax revenues as well as the GST collections,” she added.