FinMin, RBI meeting on Tuesday to decide first-half borrowing plan for FY21

The finance ministry and the RBI will meet on Tuesday to decide on the government’s borrowing plan for the first half of 2020-2021 in the middle of the closure to contain the spread of the coronavirus.

According to sources, the government would use an advance on its borrowing plan to meet the challenges posed by COVID-19 on the economy.

The meeting between the Ministry of Finance and the Reserve Bank of India (RBI) will be held by videoconference for the first time, as there is a lockout across the country, the sources said.

After the meeting, the borrowing schedule for the issuance of dated government securities and short-term paper will be announced in the evening.

According to the budget, the government plans to borrow Rs 5.36 lakh crore from the market in 2020-21, higher than the Rs 4.99 lakh crore estimated for the current year ending in March 2020.

The gross borrowing would be 7.8 trillion rupees for the next fiscal year, compared to 7.1 trillion rupees estimated for the current fiscal year.

Gross borrowing includes repayments of previous loans.

Repayment of previous loans in the next fiscal year has been set at Rs 2.35 trillion.

Presenting the budget for 2020-2021, the Minister of Finance Nirmala Sitharaman had declared: “The net market loans for the year 2019-2020 would be Rs 4.99 lakh crore and for the year 2020-2021, it would be Rs 5.36 trillion “.

“Much of the borrowing for fiscal year 2020-21 would go to government capital spending, which has been increased by more than 21%.

“As I mentioned earlier, about Rs 22,000 crore has been allocated to equity to finance certain specified infrastructure finance companies, which would leverage it multiple times and provide much needed long-term finance to the sector infrastructures. This should stimulate growth spurts in the economy, “she said.

The government raises funds in the market to finance its budget deficit with dated securities and treasury bills.

The budget fixed the budget deficit at 3.5% for the next fiscal year, against 3.8% of GDP for the current fiscal year.

The government had previously estimated the budget deficit at 3.3% of GDP for the current year, but due to the shortage of revenue, the Center had to increase it and use the “ escape clause ” of the Financial Responsibility and Budget Management Act (FRBM).

The “escape clause” allows the government to exceed its budget deficit target by 0.5 percentage points during a period of severe economic crisis, including periods of structural change and those when growth falls sharply.

.

Leave a Comment