Informist, Friday, Jun 2, 2023
By Aaryan Khanna
NEW DELHI – In a break from the past, the government used ways and means advances to fund its fiscal deficit for 2022-23 (Apr-Mar) as it had no cash balance at the end of the financial year on Mar 31, according to data by the Controller General of Accounts.
This is first time in over two decades that the government is using ways and means advances, a facility to meet temporary mismatches in cash flows, to fund the fiscal deficit.
According to Controller General of Accounts data, the government used 486.77 bln rupees from WMA to fund the fiscal deficit of 17.331 trln rupees in 2022-23.
The government also used up its entire cash balance in 2022-23 to fund the fiscal deficit, the data shows.
The government, which ended 2021-22 with a cash balance of 353.52 bln, used all of it to fund the fiscal deficit for the year ended March, the data shows.
According to RBI's Annual Report for 2022-23, the government's cash balance position was negative, and it had borrowed 486.77 bln rupees from the central bank as on Mar 31.
The government probably took recourse to this unusual measure in view of the shortfall in small savings collections and market borrowings, especially treasury bills. According to the data, the central government borrowed 3.959 trln rupees from securities against small savings, 430.59 bln rupees lower than 4.389 trln rupees projected in the revised estimate in the Budget.
Small savings collections fell short of the revised estimate by 417.54 bln rupees in 2022-23.
The net market borrowing in 2022-23, including through T-bills, was 340.26 bln rupees lower than the revised Budget estimate at 11.618 trln rupees, the data shows. This is despite the government announcing additional issuance of T-bills to the tune of 500 bln rupees in March.
The RBI had rejected all bids for 90 bln rupees of the 91-day T-bill at the last auction of the year on Mar 29, the first such move in seven years.
Informist Media had reported in early February, quoting Economic Affairs Secretary Ajay Seth, that the government could avail the WMA facility or issue T-bills to finance its fiscal deficit if the collections from small savings fell short.
CASH BALANCE
The government's cash balance has come down sharply in the last two years. The cash balance, which was at a record 2.326 trln rupees at the end of 2020-21, declined to 353.52 bln rupees at the end of 2021-22.
The zero cash balance explains why the government went into ways and means advances on Mar 31 and in early April.
The government was in WMA on all Fridays in April. The WMA borrowing, which was at 1.224 trln rupees on Apr 7, fell to zero by May 5, according to RBI data.
The data for April shows the government's cash position improved marginally from March to 23.04 bln rupees at the end of April, but compared unfavourably against the 1.186 trln rupees of cash surplus in April 2022.
Informist had reported, quoting finance ministry officials, the government had about 200 bln rupees of cash balance in the first week of May.
Informist reported in early May, quoting a finance ministry official, that the government considered issuing cash management bills early in the current financial year, but higher cost of borrowing from the market made it opt for WMA.
There may have been additional pressure on the government early this year as it had to redeem gilts worth 1.46 trln rupees in the first two months of the year against total borrowing of 2.72 trln rupees through dated securities.
The government is projected to borrow 8.88 trln rupees on a gross basis in Apr-Sep compared with 8.29 trln rupees it borrowed in Apr-Sep last year. End
Edited by Avishek Dutta
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (11) 4220-1000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2023. All rights reserved.
