NEW DELHI: India will borrow an additional 500 billion
rupees ($7.79bn) this fiscal year, a higher-than-expected figure that
could lead to it breaching its fiscal deficit target for the first time
in four years and hit the bond and equities markets.
The
announcement by the finance ministry on Wednesday comes weeks after
Moody’s Investors Service upgraded India’s sovereign credit rating for
the first time in nearly 14 years, in a boost for Prime Minister
Narendra Modi’s government. It had vowed to maintain fiscal discipline
without compromising growth.
But analysts said the
additional borrowing was a “negative” that could raise the fiscal
deficit to 3.5 per cent of gross domestic product, against Finance
Minister Arun Jaitley’s stated target of 3.2pc.
India is
having to raise the extra funds as the federal government has already
spent over $200bn in eight months to October, about 60pc of the budgeted
spending, while revenue collections were just 48pc of the target.
The
government’s tax collection plunged after the launch of the national
Goods and Services Tax (GST) in July that complicated tax filings for
business and hit the economy.
