Centre’s FY22 market borrowings are expected to remain at an elevated level, even as external deficit financing is set to increase, India Ratings and Research (Ind-Ra) has said.Accordingly, the ratings agency expects the gross market borrowings of the Central Govt to be Rs 10.82 trillion and net market borrowings to be Rs 9.02 trillion in FY22.In FY21 (April-November), the Central government has already borrowed Rs 12.16 trillion against its revised borrowing target of Rs 12 trillion.
“The accommodative monetary policy stance, weak corporate sector demand, excess banking sector liquidity, higher savings especially by households, and higher external financing (mainly borrowing from multilateral institutions such as the World Bank) helped the government to fund its deficit smoothly and reduce pressure on domestic interest rates,” the report said.
At present, India does not finance its deficit by raising sovereign bonds, it borrows from multilateral donor agencies to benefit from a long tenor and low cost.