Government Plans to Borrow ₹6.6 Lakh Crore in H2 of FY25 – Business


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Constitutes 47.2% of the overall annual plan, highlighting its significant contribution to the yearly targets. This portion reflects nearly half of the plan’s objectives, making it a critical component in achieving the goals. Its sizable percentage underlines the importance of this segment in ensuring the successful execution and fulfillment of the strategy outlined for the year.

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The Central Government has decided to keep its borrowing target unchanged for the current fiscal year. This decision reflects the government’s commitment to its planned financial strategy and signals stability in its approach to managing public finances. By maintaining the borrowing target, the government aims to ensure that it can meet its expenditure needs without altering its original fiscal projections.

To fund the revenue shortfall, the government plans to raise Rs 6.61 lakh crore by auctioning dated securities from October to March 2024-25. This step is critical for addressing the gap between government revenue and spending, allowing the government to continue funding key projects and public services without disruption. The auction of dated securities is a well-established method of raising funds, giving investors the opportunity to purchase government bonds. This, in turn, helps the government manage its financial obligations while keeping the borrowing process transparent and structured.

The borrowing is consistent with the figure specified in the budget, indicating that the government is adhering to its financial plan for the year. By keeping the lending in line with the budgeted amount, the government demonstrates a disciplined approach to fiscal management, ensuring that its financing needs are met without exceeding the planned limits. 

This alignment between borrowing and the budget reflects careful financial planning to balance the need for funds with the overall economic goals. It also reassures stakeholders that the government is on track with its fiscal strategy, reducing the risk of overspending or creating an unsustainable debt load. Maintaining this balance is crucial for long-term economic stability and investor confidence.

“Out of Gross Market borrowing of Rs 14.01 lakh crore budgeted for FY 2024-25, Rs 6.61 lakh crore (47.2 percent) is planned to be borrowed in H2 through the issuance of dated securities, including Rs 20,000 crore of Sovereign Green Bonds (SGrBs),” the Finance Ministry said in a statement.

The gross market borrowing of Rs 6.61 lakh crore will be carried out through a series of 21 weekly auctions. These auctions provide a structured and predictable schedule for raising funds, giving the government and market participants clarity on when and how the borrowing will occur. By offering securities with maturities ranging from 3 to 50 years, the government is distributing its debt obligations across a broad spectrum of time horizons. This approach helps spread the repayment burden over time, ensuring it doesn’t concentrate on any single period. Additionally, offering a variety of maturities allows the government to attract a diverse range of investors, each with different risk appetites and investment goals, thereby improving the chances of fully meeting its borrowing target. The strategic distribution of borrowing over multiple years supports long-term fiscal sustainability by avoiding a heavy reliance on short-term debt.

To handle temporary cash flow mismatches that might arise in government accounts during the second half of the fiscal year 2024-25, the Reserve Bank of India has set the Ways and Means Advances (WMA) limit at Rs 50,000 crore. The WMA is a crucial tool for maintaining liquidity in government finances, acting as a financial buffer when there are short-term mismatches between revenues and expenditures. By setting this limit, the RBI ensures that the government can access immediate funds to cover any temporary shortfalls, allowing essential functions and payments to continue uninterrupted. This provision is necessary during revenue fluctuation, as it helps the government avoid sudden financial strain or the need to take on additional borrowing at unfavorable terms. Balancing short-term liquidity needs with its overall borrowing strategy allows the government to focus on longer-term financial planning without compromising day-to-day operations.

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