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Discuss how the government is planning to fund the massive expenditure...

  Jun 07, 2020

Discuss how the government is planning to fund the massive expenditure amidst economic slowdown and increasing public spending for FY21?

  1. The government has recently increased its market borrowing estimate by staggering ₹4.2 lakh crore to ₹12 lakh crore for the current fiscal to deal with the expected shortfall in revenue due to the impact of COVID-19 crisis on the economy.
  2. The government resorts to market borrowing to make up for mismatch between its revenue and expenditure.
  3. The estimated gross market borrowing in FY 2020-21 will be ₹12 lakh crore in the place of ₹7.80 lakh crore as per BE 2020-21. 
  4. The government has also increased the weekly borrowing target to ₹30,000 crore from ₹21,000 crore fixed on March 31.
  5. Finance Minister in Budget for 2020-21 had pegged gross borrowing in the new fiscal at ₹7.8 lakh crore, higher than ₹7.1 lakh crore estimated for 2019-20. 
  6. With the increase in estimate, the government would have to revise upwards its fiscal deficit target from 3.5% pegged for the current fiscal.
  7. A downgrade of India’s rating would likely occur if India’’s fiscal metrics weaken materially. 
  8. This would probably happen in the context of a prolonged or deep slowdown in growth, with only limited prospects that the government would be able to restore stronger output through economic and institutional reforms.