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A look at the various components of government borrowings

business Updated: Feb 19, 2015 18:53 IST
Gaurav Choudhury
Gaurav Choudhury
Hindustan Times
Fiscal deficit

Governments, like individuals and households, cannot always meet expenses from its income. While a bulk of it meets bulk of its requirements from its earnings from taxes and other sources, very rarely does any major economy have a surplus funds in public coffers at the end of the year. HT takes a look at the various components of government borrowings:

Fiscal deficit

Fiscal deficit broadly represents the amount of money that the government has to borrow every year to meet its expenses. In budget accounting parlance it represents the difference between government's total revenue receipts (tax and non-tax) and capital receipts such as recoveries and interests earned on loans given to state governments. A slowing economy has meant lower tax revenues prompting the government more over the last few years.

4.5% - Of GDP India's fiscal deficit as a percentage of GDP in 2013-14, 4.1% - Of GDP that the government is expected to aim for in 2014-15

Over the longer term fiscal deficit would be cut by 0.6% every year to bring it to 3% by 2016-17 through cost cuts as well as enhanced revenue.


Rs 600,000 crore - Government's budgeted gross market borrowing for 2014-15

The government raises loans from the market by selling dated government securities through auction. The Reserve Bank of India (RBI), as the government's debt manager, conducts these auctions.

Apart from fixed coupon securities, the government also issues floating rate bonds

Borrowing Calendar

The government and companies borrow from the same pool of funds from banks. Since 2002-03, the central government has been announcing a half-yearly indicative market borrowing calendar

Short-term loans

Govt issues treasury bills, which offer short-term investment opportunity to financial institutions and banks. Treasury Bills of 364/182/91 day maturity are primarily issued through auctions.

Besides, the government also issues cash management bills-usually with a maturity period of 91-days-- to meet the temporary cash flow mismatches

Small Savings Schemes

Rs 389902.61 crore - Outstanding liabilities of government on savings deposits as on April 1, 2014

Rs 187391.06 crore - Outstanding liabilities of government on savings certificates as on April 1, 2014

Rs 261649.55 crore - Outstanding liabilities of government on public provident fund as on April 1, 2014

The government also borrows money from individuals through a range of popular saving schemes. These include the post office savings account, national savings certificates and public provident funds

While middle-class Indians rely on small-investment options offered at post offices for social security and parking surplus money, the government depends on this pool of money to finance a part of its budget.

The money collected through small savings schemes are pooled under theNational Small Savings Fund (NSSF).

Not good with numbers? Here is Gaurav Choudhury's simple take on the budget