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Government plans to borrow INR4.9t from the market in 1HFY21
Amounts to 63% of gross market borrowings for FY21BE
* The government has budgeted to borrow INR4.88t in 1HFY21. This implies that the government plans to borrow 63% of annual borrowings planned for FY21BE, similar to the ratio last year. It also suggests that, as of now, the government plans to stick to its budgeted target of gross market borrowings for FY21 (BE).
* This is very difficult to comprehend because of three reasons: (i) already tight fiscal position of the central government, (ii) additional burden of INR1.7t worth welfare package announced on 26th Mar’20 in light of COVID-19 and (iii) severely impacted government receipts (especially indirect taxes) due to loss of economic activity at least till mid-Apr’20.
* If this is the case, we expect the government to revise its borrowing calendar toward 2QFY21 or go for some other means of financing the additional gap.
* Notably, just a day back, the RBI announced opening up of government securities under the ‘Fully Accessible Route’ (FAR) to non-resident investors without any limits, except of the fact that those securities will also be available for domestic investors. These are securities of 5-, 10- and 30-year tenor and are called ‘specified securities.’ Although there is no clarity on how much the government targets to borrow through this route, it certainly implies that government is looking for other ways to finance its FY21 spending.
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