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Government hikes its market borrowing to Rs 12 lakh crore from Rs 7.80 lakh crore for FY 21: COVID-19 impact

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On May 8, 2020 The Finance Ministry has informed that Government has hiked its estimated gross market borrowing to Rs 12 lakh crore(additional Rs 4.2 lakh crore) from Rs 7.80 lakh crore for Financial Year(FY) 2020-21 as per the Budget Estimates(BE) so as to tackle the expected shortfall in revenue due to the impact of COVID-19 crisis on the economy.COVID-19 impact Govt hikes market borrowing limitKey Points

i.So far, from the start of this fiscal, the government has borrowed Rs 98,000 crore through Government Securities (GSecs).  In the 1st half of the FY2021, the government will increase its borrowing to Rs 6.98 lakh crore(58% of the total borrowing target) against the original Rs 4.88 lakh crore.

ii.In the 2nd half up to Rs 5 lakh crore is likely to be borrowed against Rs 2.92 lakh crore estimated in the budget

iii.The government will borrow Rs 6 lakh crore from May 11, 2020 to September 30, 2020 by the issue of GSecs & has also raised weekly auction of dated securities to Rs 30,000 crore as against the earlier decision of Rs 19,000-21,000 crore

iv.In the Budget for 2020-21 Finance Minister Nirmala Sitharaman has fixed gross borrowing at Rs 7.8 lakh crore, higher than Rs 7.1 lakh crore estimated for 2019-20.

v.As there is an increase in the borrowing estimate the government might revise upwards its fiscal deficit target from 3.5% pegged for the current fiscal year.

vi.The Finance Ministry has decided to increase borrowing through short term government papers of up to 1 a year by Rs 2 lakh crore.

vii.As per the earlier plan, the government was to borrow Rs 3 lakh crore from treasury bills over 12 weeks with weekly auction of Rs 25,000 crore each. Thus, the total borrowing through treasury will go up to Rs 5 lakh crore from Rs 3 lakh crore decided earlier.

What is gross market borrowing?

The money that the government borrows during a particular fiscal year is called the net borrowing, while gross borrowing includes net borrowing for the year and the repayment of past loans.

The government borrows money from the market to meet any shortfall in funds to meet its expenditure when it is unable to cover it with income earned through tax, non-tax revenue.

The borrowing happens by issuing dated securities and treasury bills, the purchase and sale of which is conducted by the Reserve Bank of India (RBI).

About Finance Ministry:
Union Minister– Nirmala Sitharaman(Constituency- Karnataka)
Minister of State– Anurag Singh Thakur(Constituency- Hamirpur, Himachal Pradesh)