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Business News/ Budget / Budget 2024: Centre's FY25 gross market borrowings pegged at 14.13 trillion
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Budget 2024: Centre's FY25 gross market borrowings pegged at ₹14.13 trillion

The gross borrowing target for FY25 is lower than the FY24 budget estimate of ₹15.43 trillion

The government, which reiterated its commitment to a continued fiscal consolidation, has set a fiscal deficit target of 5.1% of GDP for FY25.Premium
The government, which reiterated its commitment to a continued fiscal consolidation, has set a fiscal deficit target of 5.1% of GDP for FY25.

New Delhi: The central government plans to borrow a gross 14.13 trillion from the bond markets in 2024-25 to finance its fiscal deficit, according to the interim budget for FY25 presented in parliament on Thursday.

The government, which reiterated its commitment to a continued fiscal consolidation, has set a fiscal deficit target of 5.1% of GDP for FY25.

On a net level, which strips out repayments of past loans, the Centre would borrow 11.75 trillion.

"The surprise lower fiscal deficit target for FY25 at 5.1% of GDP in India will lead to a positive initial reaction in the bond market, with bond yields potentially decreasing. This unexpected development may create a short-term rally. The impact on corporate bonds would likely depend on how bond traders interpret and also based on system liquidity," said Venkatakrishnan Srinivasan, managing partner at Rockfort Fincap Llp, a financial advisory firm.

The gross borrowing target for FY25 is lower than the FY24 budget estimate of 15.43 trillion. In response, the 10-year benchmark government bond yield dropped to 7.04%, from 7.14% on Wednesday, although concerns persist the government could announce a higher borrowing target in the full budget for the next fiscal year, after the general elections likely in April-May.

Fiscal deficit is the difference between the government’s income and expenditure.

A higher fiscal deficit leads to a greater debt burden and more spending on debt servicing, which can hurt the economy and risk devaluing the currency while crowding out private investments.

In her budget speech, finance minister Nirmala Sitharaman announced the FY24 revised estimates for total receipts stand at 27.56 trillion, and expenditure at 44.90 trillion.

The FY24 budget had estimated total receipts at 27.16 trillion, and expenditure at 45.03 trillion.

The budget estimates for FY25 peg total receipts at 30.80 trillion, and total expenditure at 47.66 trillion.

Helped by larger revenues from asset sales and dividends, and combined with lower market borrowings, the government is likely to meet the FY25 fiscal deficit target of 5.1% of GDP, lower than a revised 5.8% for FY24.

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Published: 01 Feb 2024, 02:36 PM IST
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