The Finance Ministry on Thursday announced a cut in the borrowing for current Fiscal Year (2022-23) by ₹10,000 crore to ₹14.21 lakh crore. This decision came a day after the Union Cabinet approved extending free foodgrains programme by three months at a cost over ₹44,700 crore.
It is believed that the better-than-expected tax collection direct taxes and Goods & Services Tax (GST) helped the government cut the overall borrowing. This also indicates government might be able to stick to the fiscal deficit target of ₹ 16.6 lakh crore or 6.4 per cent of GDP.
According to a statement by the Finance Ministry, out of the gross market borrowing of ₹14.31 lakh crore projected for FY23, the government has decided to borrow ₹14.21 lakh crore. Accordingly, the balance amount of ₹5.92 lakh crore (41.7 per cent of ₹14.21 lakh crore) is planned to be borrowed in the second half of FY23 through dated securities, including ₹16,000 crore through issuance of Sovereign Green Bonds (SGrBs).
“The gross market borrowing of ₹5.76 lakh crore (40.5 per cent) shall be completed through 20 weekly auctions. The market borrowing will be spread over 2, 5, 7, 10, 14, 30 and 40 years securities. The share of borrowing (excluding SGrB) under different maturities will be: 2 year (6.25 per cent), 5 year (12.15 per cent), 7 year (10.42 per cent), 10 year (20.83 percent), 14 year (19.1 per cent), 30 year (15.63 per cent) and 40 year (15.63 per cent),” it said.
Greenshoe option
The government will continue to exercise greenshoe option to retain an additional subscription of up to ₹2,000 crore against each of the securities indicated in the auction notification. It will also continue to carry out switch operations to smoothen the redemption profile.
“To take care of temporary mismatches in Government accounts, the Reserve Bank of India has fixed the Ways and Mean Advances (WMA) limit for H2 of FY 2022-23 at ₹50,000 crore,” the statement said.