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Informist, Wednesday, Jul 24, 2024

 

MUMBAI – The current funding choices of the government signal that there is limited scope to reduce market borrowing further this financial year started April, ICICI Securities Primary Dealership said in a research report. Even post 2024-25, the supply of dated securities is unlikely to come down in a hurry, the report said.

In the Union Budget 2024-25 (Apr-Mar) detailed on Tuesday, Finance Minister Nirmala Sitaraman announced a cut in the gross market borrowing to 14.01 trln rupees from 14.13 trln rupees announced in the Interim Budget. The net market borrowing was reduced to 11.63 trln rupees from 11.75 trln rupees pegged in the Interim Budget. The cut in borrowing was, however, lower than what the market had expected. 

 

The government's excess cash balance is around 2.07 trln rupees, whereas the net dated borrowing has been pegged lower by only 120 bln rupees.

 

 

Instead, the government sharply lowered borrowing through Treasury bills, with short-term borrowing at (-)500 bln rupees from 500 bln rupees, which means it will net redeem T-bills this year. Short-term borrowing would also be lower given the government has conducted buybacks and switch auctions, the report said.

 

"This is in line with our expectation that unanticipated cash buffer should first go towards lowering short term borrowings," the report said.

 

The rest of the excess cash buffer is expected be used to adjust the lower expected collection from small savings schemes and lower 'other' receipts, the report said. The borrowing through small savings is pegged at 4.20 trln rupees for the current financial year, against 4.66 trln rupees estimated in the Interim Budget.

 

"These adjustments imply that the government is poised to end the current fiscal at a modest 310 bln rupees cash balance only and that does not provide any scope to lower the borrowing later in the fiscal year or to draw down the cash balance to lower the borrowing requirement in 2025-26," the report said. "Still, there can be an argument to increase T-bill borrowings next year to allow some reduction in dated borrowing or other borrowings."  End

 

Reported by M.C. Adhiinthran

Edited by Akul Nishant Akhoury

 

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