Centre Effectively Cuts Borrowing Plan for Current Fiscal

Rs 2 Crore Penalty imposed (1)

Keeping in views the strong tax collection, the Central Government (CG) on Monday has decided to cut its gross borrowing target for the fiscal year. It has announced that it will absorb Rs 1.59 trillion of additional borrowing for tax compensation to states within its annual target.

Consequently, it reduces the annual gross borrowing target to Rs 10.46 trillion for the year to 31 March from the budgeted Rs 12.05 trillion.

On 27th September, 2021, the CG said that it would borrow Rs 5.03 trillion in October to March after borrowing Rs 7.02 trillion in the first half. Whereas, CG has also announced that the second-half borrowing also factors requirements for the release of the balance amount to states on account of back-to-back loan facility in-lieu of GST compensation during the year.

Earlier, in May GST Council meeting, it was decided that the CG would borrow Rs 1.59 trillion and release it to states to compensate for revenue losses. In July CG released Rs 75,000 crore to states accordingly.

Further, the strong 17 percent growth in the Centre’s gross tax collections so far in FY22, shows the decreasing impact of the pandemic on Indian macros. Gross direct tax receipts in the first half of the current fiscal jumped 47 percent from a year earlier to Rs 6.46 trillion, shows the economic recovery. In case of indirect tax, central and state governments collected Rs 1.12 trillion in GST in August for transactions in July.

Considering the current trend, which are expected to cross the budgeted target for FY22, on 24th September CG withdrew its earlier direction to most CG departments and ministries to limit their expenditure to 20 percent of the budget estimate for the September quarter.

Instructions regulating bulk items of expenditure amounting to more than Rs 200 crore have also been relaxed for items pertaining to budgeted capital expenditure for the remaining part of the current financial year.


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