Budget 2024: Government's borrowing from markets to reduce to Rs 14.13 lakh crore in FY25

Budget 2024: Finance Minister Nirmala Sitharaman during the Budget presentation, proposed to borrow Rs 14.13 lakh crore by issuing dated securities to meet revenue shortfall in the next financial year starting on April 1. This is lower than last year’s gross borrowing estimate of Rs 15.43 lakh crore, which was the highest ever.

Government Borrowing

The lower borrowing estimate for 2024-25 is on account of growing tax revenue and the government’s resolve to meet its fiscal consolidation roadmap.

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About net borrowing estimate, Sitharaman said it would be Rs 11.75 lakh crore during the next financial year. As a result, the government would make repayment of Rs 2,37,818 crore during the year.

"The gross and net market borrowings through dated securities during 2024-25 are estimated at Rs 14.13 and Rs 11.75 lakh crore respectively. Both will be less than that in 2023-24. Now that the private investments are happening at scale, the lower borrowings by the Central Government will facilitate larger availability of credit for the private sector," she said.

There are signs of private investment picking up in the steel and cement sector due to massive capital expenditure by the government.

Against the estimate of Rs 10 lakh crore for 2023-24, the government has earmarked Rs 11.11 lakh crore during the next year. As per the revised estimate for FY24, the capital expenditure would be Rs 9.5 lakh crore, short by Rs 50,000 crore over the BE for the current fiscal.

During the covid years, due to higher expenditure the government borrowings hit a record high.

A government borrows money from the market to make up for expenses that exceed its total revenue. This is called a fiscal deficit.

PSU Banks to do well

The reduced borrowing estimate is expected to help banks to be able to lend more next year. This will also lead to an increase in the value of government bonds, which would lead to added profits for state-owned banks.

State-owned banks will see profits because it is mandatory for them to invest in government securities and government's decision to reduce the borrowing will add value to the bonds that the banks already hold.

Finance Minister Nirmala Sitharaman also highlighted in her Budget speech that this will leave the banks with more money to lend to private sector companies and keep a check on lending rates.