Government borrows 55% more so far this fiscal as lockdowns hit revenue collections

Indicating a massive revenue crunch due to the second wave of the pandemic that has forced many states to declare full lockdowns for almost two months now, the Centre has borrowed Rs 2.1 lakh crore so far this fiscal — a whopping 55 per cent more than what it was a year ago.

But thanks to the deft yield management by the central bank, the only saving grace has been the low cost of the money raised so as despite the steeply higher drawdowns, the average cost of the money for the government has been under check and at the Friday’s auction, it is paying only 6.08 per cent, much lower than last year and the same as last week, chief economist of Care Ratings Madan Sabnavis said on Friday.

The market borrowing of Rs 2.1 lakh crore is 17.5 per cent of the budgeted debt creation of Rs 12.05 lakh crore for the full year and 30 per cent of the first half borrowings calendar of Rs 7.24 lakh crore, he said.

He further said total borrowings by the Centre so far this fiscal is a whopping 55 per cent more than the same period last year and attributed it to the lockdowns in most states and the resultant impact on revenue collections.

At the latest borrowing on Friday, the government borrowed only Rs 26,550 crore of the Rs 32,000 crore notified. Of the total bids worth Rs 19,114 crore were accepted by the RBI while bids for Rs 7,437 crore were devolved to the primary dealers.

However, the total borrowing for the week is Rs 550 crore more than the notified amount but is 30 per cent lower than the previous week. Total market borrowings are in May climbed to Rs 1.1 lakh crore, Rs 6,545 crore more than in April.

The amount exercised under the green shoe option so far this year rose to Rs 23,398 crore while total amount devolved to the primary dealer is Rs 18,363 crore.

The weighted average yields in this auction remained unchanged at 6.08 per cent, same as last week’s.

Of the total borrowing this fiscal, 24 per cent is via 14-year GSecs, 17 per cent via five-year bonds and around 15 per cent via the 10-year bonds. For the 2-year bonds maturing in 2023, there was an over-subscription of Rs 550 crore.