India is likely to fund roughly $28 billion of its expenditure outlay in its budget for fiscal 2020/21 via off-budget borrowings, three government sources said, as it seeks to revive a sagging economy while keeping its fiscal deficit in check.
Prime Minister Narendra Modi’s government is under pressure to increase spending on rural welfare schemes and infrastructure to boost growth that has fallen for six straight quarters.
Off-budget borrowings are a means by which the government keeps its fiscal deficit in check by making quasi-government entities borrow on its behalf, to partly fund its expenditure plan for the year.
This would mark a roughly 13.8% increase in so-called off-budget borrowings from an estimated 1.75 trillion rupees ($24.6 billion) in the ongoing fiscal year, said the three sources, who have direct knowledge of the matter and asked not to be identified as the discussions are private.
Finance Minister Nirmala Sitharaman, who will deliver the budget speech, is widely expected to announce stimulus measures for small businesses and non-banking finance companies as a cut in corporate tax rates and rate cuts by the central bank have failed to revive growth.
In the 2020/21 budget, Sitharaman could announce plans to spend over 105 trillion rupees ($1.48 trillion) on infrastructure in the next five years and expand annual spending on railways, roads, renewable energy, water and health sector by up to 20%, said the first official.