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MUMBAI: Burdened by higher expenses due to the devastating impact of the Coronavirus Pandemic of the economy, the government said on Friday that it will borrow from the market around Rs 12 lakh crore in fiscal year 2020-21, a massive increase of Rs 4.2 lakh crore, or a 54% jump over the estimated budget of Rs 7.8 lakh crore.
The decision for further indebtedness was also fueled by a severe loss of government revenue due to stagnant economic activity across the country due to the strict closure, economists said.
This, economists said, will push fiscal deficit from target 3.5% for 2020-21 to 5.5%. GST’s revenues, as well as those from direct and indirect taxes, are under great pressure, while asset sales at state-owned companies expected to earn much-needed revenues have stalled amid the Covid pandemic. 19. There have been more and more calls to present a great Fiscal stimulus to help various sectors of the economy overcome the severe impact of Covid-19. The government and the RBI have taken some steps to help the poor and the financial markets in addition to launching loans, but the Indian industry has requested a great stimulus to help sectors affected by the pandemic to restart their activity and help restore growth.
Between May 11 and September 30, for more than 20 weeks, the government will borrow Rs 30 billion each week by auctioning its two to 40-year-old bonds, data showed on the RBI website. . So far, since April 9 and May 8, the government has already loaned Rs 1.06 lakh crore from the market.
“The estimated gross indebtedness of the market in the financial year 2020-21 will be Rs 12 lakh crore instead of Rs 7.80 lakh crore according to the Estimated Budget 2020-21. The previous review of the loans has been necessary due to the Covid-19 pandemic, ”said the RBI, which conducts these weekly auctions.
Economists said increased market indebtedness will help the government meet the stimulus and additional spending needs as a result of the pandemic.
“The announcement of additional loans reflects the possible loss of government revenue as economic activity continues in a blocking mode. Such additional loan announcements also came after the global financial crisis and currently reflect the deteriorating financial state of the Center’s finances and idle states. We believe that this measure will allow the Central Government to partially mitigate the loss of income in the interregnum, “said Soumya Kanti Ghosh, the group’s main economic advisor in State bank of india.
The main economic adviser to the government. Krishnamurthy Subramanian In an interview with TOI on Friday, market loans were said to be an option to raise funds for additional expenses and that the size of the stimulus should be in line with the country’s tax-to-GDP ratio.
A SBI report from April 3 mentioned that with Covid-19 related spending going up while at the same time government revenues have been severely affected due to the closure of most economic activities, loans were expected of the central and state governments left. above. “We believe that states require more support from the center as their finances are severely stressed as they are the last mile of Covid-19 deliveries and also because the possibility of a major slippage in central government finances is now a reality.” , according to the report. said.
With the central government now expressing its intentions to borrow around Rs 4.2 lakh crore more than planned, economists now believe that even states will soon borrow more to cover additional expenses. These additional loans will surely raise the fiscal deficit target from the current level of 3.5%, they said.
The announcement of an increase in government loans came on the day it introduced a new 10-year bond that will now be the benchmark. The new 10-year bonds were priced at 5.79% per year and closed the day’s operations at 5.71%, a low level of 11 years.
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