The Centre may take over Rs 4 lakh crore loan from the market this year to fulfil its fresh commitments ahead of the 2019 general elections. The Ministry of Finance is expected to announce its market borrowing plan on Monday.
Sources close to the development told DH the loan amount may cross a few thousand crores above Rs 4 lakh crore in the first six months (April-Sept) of the coming financial year.
Two massive schemes “the National Health Protection Mission and hike in minimum support price for farmers at 50% more than the production cost” which have not been adequately funded in the Union Budget may have necessitated the move.
The government is keen to introduce the world’s largest state-funded healthcare programme from August 15 though the Cabinet has approved two target dates, including October 2, sources said.
The government borrows from the market when its revenues are insufficient to pay for a given level of state spending. The flip side of a large borrowing is that it causes deficits and its impact is felt for several years to come.
The 2018-19 Union Budget has pegged the gross borrowing of the government at Rs 6.06 lakh crore. But this includes the interest payment on the past loans.
In 2017-18, too, the government had to borrow more from the market to finance its spendings as the revenues from Goods and Services Tax fell short of estimates.
In fact, an additional gross amount of Rs 50,000 crore that the government sought to borrow from the market in December was a substantial increase from what was budgeted and since 2012, the government had not taken such a big loan from the market.
The ministry officials had met primary dealers last week seeking suggestions for a smooth borrowing.
The Monitoring Group on Cash and Debt Management, too, held a meeting on Saturday. The meeting was also attended by RBI officials.
Sources said steps to improve the market appetite for government bonds also figured in the meeting.
The government is concerned about the rise in bond yields. Since August, the yields on government bonds have risen by more than 100 basis points over concerns of a possible rise in the Budget Deficit. The increase in bond yields will only add to the government’s borrowing cost.
The government raises funds from the market through dated securities and Treasury bills having a maturity of less than one year. (DH)
