Government Borrowings

Subject – Economy

Context – Govt pegs H2 borrowing at ₹5.03-lakh cr

Concept –

The Finance Ministry pegged the government borrowing for the second half of 2021-22 at ₹5.03-lakh crore.
The buoyancy in tax collections so far in the current fiscal has played a key factor in ensuring that overall borrowing will be lower this year, say economy watchers.
For the full fiscal year, the gross market borrowing may not go beyond the ₹12.05-lakh crore projected in the Union Budget.

What is government borrowing?

Borrowing is a loan taken by the government and falls under capital receipts in the Budget document.
Usually, Government borrows through issue of government securities called G-secs and Treasury Bills.

How does increased government borrowing affect govt finances?

Bulk of government’s fiscal deficit comes from its interest obligation on past debt.
If the government resorts to larger borrowings, more than what it has projected, then its interest costs also go up risking higher fiscal deficit. That hurts government’s finances.
Larger borrowing programme means that the public debt will go up and especially at a time when the GDP growth is subdues, it will lead to a higher debt-to-GDP ratio.

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To know about Fiscal Deficit, please click here.

To know about Fiscal Consolidation and Escape Clause, please click here.