Lower Govt Borrowings To Stabilise Inflation, Boost Investments: RBI Governor

New Delhi, Feb 13 (KNN) According to RBI Governor Shaktikanta Das, lower government borrowings compared to street predictions will open up more resources in the banking system, facilitating private sector investments and inflation stabilisation.

Das expressed confidence in the Reserve Bank's ability to manage the anticipated surge in foreign inflows into Indian government debt following their inclusion in JP Morgan's bond index, reported ET.

The governor noted that the current borrowing levels are below initial market projections, suggesting that this reduction would enhance liquidity in the banking sector, facilitating increased credit availability for private sector endeavours.

He underscored the potential of reduced borrowing to contribute to inflation moderation, although refrained from specifying the extent of its impact.

Finance Minister Nirmala Sitharaman's interim Budget for 2024-25 proposes a borrowing target of Rs 14.13 lakh crore through dated securities, lower than the previous year's gross borrowing estimate of Rs 15.43 lakh crore, driven by escalating tax revenues and adherence to fiscal consolidation objectives.

Das highlighted the crucial role of borrowing quantum in shaping monetary policy, citing, “While making monetary policy it is one of the factors which is taken into consideration. I would say it is growth inducing, and it helps in moderating inflation levels.”

Regarding the debt-to-GDP ratio, Das noted its peak at 88 per cent during the COVID-19 pandemic, with subsequent moderation anticipated.

He welcomed the government's move to lower the fiscal deficit target to 5.1 per cent of GDP for the upcoming financial year and 4.5 per cent in subsequent years, anticipating a favourable impact on the debt-to-GDP ratio.

The governor emphasised RBI's role as the government's debt manager, committed to ensuring seamless and non-disruptive execution of the borrowing program. He acknowledged debt-to-GDP ratio as a critical consideration in the fiscal consolidation agenda.

(KNN Bureau)