The State Bank of India (SBI) has released a report detailing the Indian government's market borrowing plans for the financial year 2025-26 (FY26). The report suggests that these plans are well-aligned to support fiscal policy while complementing monetary policy.
For FY26, the government has budgeted gross market borrowing through dated securities at Rs 14.8 lakh crore, with repayments estimated at Rs 3.3 lakh crore. This results in a net market borrowing of Rs 11.5 lakh crore, which accounts for about 73% of the fiscal deficit. This figure is higher than the Rs 10.5 lakh crore from the previous budget.
The report states, "Market borrowing in FY26 are comfortable for fiscal policy to support monetary policy." Additionally, the government plans a switch of Rs 2.5 lakh crore, replacing older securities with new ones, which will not impact the overall fiscal situation.
At the state level, gross borrowing is expected to be Rs 10.9 lakh crore, with repayments at Rs 3.7 lakh crore, leading to a net borrowing of Rs 7.2 lakh crore. Combined with central government borrowing, the total net borrowing of the Centre and states is Rs 18.7 lakh crore. Including public sector undertakings (PSUs), the total borrowing for FY25 is 6.1% of GDP.
Looking ahead, SBI estimates gross market borrowing from FY27 to FY31 to be between Rs 93.8 lakh crore and Rs 95.2 lakh crore, averaging around Rs 18-19 lakh crore per year. This is higher than the current annual borrowing rate of Rs 15 lakh crore.
The report highlights the need for the government to explore alternative funding sources, such as small savings schemes, to reduce reliance on market borrowings. It states, "Government Fiscal path for next 5 years shows challenge in diversifying the borrowing base."
The Union Budget for FY26 outlines various fiscal scenarios based on GDP growth trends and fiscal adjustments for FY27 to FY31. The SBI report indicates that managing the borrowing program will be challenging, and diversifying borrowing sources will be crucial for maintaining fiscal stability. With higher borrowing requirements projected, the government may need to balance its fiscal strategies to sustain growth while keeping debt under control.
FY26 stands for the financial year 2025-2026. In India, a financial year starts on April 1st and ends on March 31st of the next year.
SBI stands for State Bank of India, which is the largest bank in India. It provides various banking services to people and businesses.
Market borrowing refers to the money that the government borrows from the public and financial institutions by issuing bonds and securities. This helps the government fund its expenses.
Gross borrowing is the total amount of money the government plans to borrow in a year before repaying any old loans.
Net borrowing is the amount of new borrowing after subtracting the money used to repay old loans. It shows how much extra money the government needs.
Fiscal deficit is the difference between the government's total income and its total spending. A higher fiscal deficit means the government is spending more than it earns.
A securities switch is when the government exchanges old bonds for new ones. This helps manage debt without increasing the fiscal deficit.
Fiscal impact refers to the effect on the government's budget and finances. No fiscal impact means the action doesn't change the budget balance.
Diversifying funding sources means finding different ways to get money, like borrowing from different places, to reduce risk and maintain financial stability.
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