"...the government plans to stick to its budgeted target of gross market borrowings for FY21 (BE). This is very difficult to comprehend because of three reasons: tight fiscal position of the central government, additional burden of Rs 1.7 lakh crore welfare package and severely impacted government receipts (especially indirect taxes) due to loss of economic activity at least till mid-April," the brokerage said.
The government has budgeted to borrow Rs 4.88 lakh crore in first half of FY 21. This is 63 per cent of annual borrowings budgeted for the current fiscal, similar to the ratio last year. The borrowing calendar of the government also suggests that, as of now, it plans to stick to its budgeted target.
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However, resources to finance additional expenditure on account of measures to contain the adverse impact of COVID-19 pandemic would constrain the government to increase its borrowing later.
"If this is the case, we expect the government to revise its borrowing calendar towards second quarter of FY21 or go for some other means of financing the additional gap," Motilal Oswal report said.
Earlier this week, the RBI announced opening up of government securities und er the 'Fully Accessible Route' (FAR) to non-resident invest ors without any limits, except of the fact that those securities will also be available for domestic investors. These are securities of 5, 10 and 30-year tenor and are called 'specified securities'.
Although there is no clarity on how much the government targets to borrow through this route, it certainly implies that government is looking for other ways to finance its FY21 spending, the brokerage said.