High Gilt Redemption
FY26 gross borrowing may be inflated on high redemption, says govt source
This story was originally published at 20:26 IST on 11 November 2024
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--Govt source: FY26 gross borrowing likely to be inflated on high redemption
By Krity Ambey and Sagar Sen
NEW DELHI – The Centre's gross borrowing in 2025-26 (Apr-Mar) may be inflated on account of high gilt redemption, a finance ministry official said. "But the net borrowing estimate for FY26 would not be a very high number," the official added.
"A large chunk of market loan repayment is scheduled next year," the official said. "These are the loans that the government took in the pandemic year." The Centre's borrowing jumped to INR 12.60 trillion in FY21 from INR 7.10 trillion in FY20 as the fiscal deficit ballooned to 9.2% of GDP due to the COVID-19 pandemic.
As per the Reserve Bank of India data, government securities worth INR 4.34 trillion are due for redemption in FY26. According to Budget documents, the government's repayment in the current financial year is projected at 2.38 trillion, excluding INR 1.24 trillion received from goods and services tax compensation cess for repayments of GST loans.
The Budget has projected gross borrowing for FY25 at INR 14.01 trillion in the current year and net borrowing at INR 11.63 trillion.
The official said the government may not issue any sovereign gold bonds in the next fiscal year as it is one of the most expensive means to fund the deficit. In the Budget presented on Jul. 23, the government lowered the gross sovereign gold bonds issuances to INR 185 billion from INR 296.38 billion in the Interim Budget presented on Feb. 1.
The government had introduced the gold bond scheme in 2015 to wean away speculative investors from buying physical gold in a bid to reduce the imports of the precious metal. At maturity, investors in sovereign gold bonds get 2.5% interest per annum in addition to the prevailing price of gold. With gold prices surging in the last few years, the return on investments in gold bonds is very high. End
Edited by Saji George Titus
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