NEW DELHI: RBI governor Shaktikanta Das on Monday said lower govt borrowings than the market estimates will free more capital for the private sector, resulting in easing of inflation and bolstering growth.
He also backed govt’s focus on capex, arguing that it is a GDP multiplier, as it creates a multiplier effect of 1.2-1.4 times. “A thrust on capex is always welcome,” he told reporters, after a post-Budget meeting of the central board, which was addressed by FM Nirmala Sitharaman. “This year’s borrowing is lower than what initially the markets had expected. Lower quantum of borrowing means…it would ensure that much more resources will be available in the banking system to meet the requirements of the private sector,” the governor said.
Besides, he expects lower borrowing to help stabilise inflation. In the interim Budget, Sitharaman laid out a fiscal consolidation roadmap with a target to lower the fiscal deficit to 5.1% of GDP next year and to 4.5% in FY26. In addition, govt has proposed a lower borrowing for the next financial year on account of buoyant tax revenue.
Noting that the quantum of borrowing is very important for monetary policy, Das said, “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.” On the debt-to-GDP ratio, Das said it had reached 88% during the Covid period and has now moderated to 81%.