Small Savings Collection Boost Could Reduce Government Borrowings This Fiscal

A boost in net collections on small savings schemes could offer the government room to reduce its borrowings in the second half of the fiscal, according to an official with knowledge of the matter.

If the current trend persists, a bonanza of small savings could open options for the government to reduce borrowing, the official quoted above said on the condition of anonymity.

The growth of net collections up to June for FY24 is 48.06% as compared with 9.9% over the corresponding period last year, the official said. As of June, the government had received 26% of its net collections for the year, according to the official.

So far, the government has achieved around 34% of its budgeted target of small savings collections this year. The securities issued against small savings in the Union budget 2023 are at Rs 4.71 lakh crore.

Top contributors to the government's savings have been the Senior Citizen Savings Scheme and the newly launched Mahila Samman Patra.

As of July this year, the net collection of the Senior Citizen Savings Scheme was over Rs 55,000 crore, which is around 180% higher than the collections over the corresponding period last year, the official said.

The government's newly launched Mahila Samman Savings Certificate has also received a positive response, with over 1,580 lakh accounts opened and collections reaching Rs 9,611 crore, as of Aug. 20.

The Mahila Samman savings certificate was launched by the Union Finance Minister in her Union budget 2023 speech offering a maximum deposit facility of up to Rs 2 lakh, with an interest of 7.5% per annum for a period of two years.

The government's borrowing calendar for the first half is set at Rs 8.9 lakh crore, out of the full fiscal's borrowing target of Rs 15.4 lakh crore.

The optimism on reduced government borrowings comes in a year where media reports suggest the government is on track to meet its fiscal deficit target of 5.9% of the GDP or Rs 17.86 lakh crore in actual terms.

The government also expects to reach its receipts target of Rs 45.14 lakh crore.

Experts have said that corporate tax collections in the current fiscal are seeing a slower pace of growth as compared with the same period last year. Disinvestment shortfall and a possible overshoot of the budget allocation for MNREGA also remain factors being observed closely by economists. Disinvestment receipts so far have reached Rs 5,600 crore of the budgetary target of Rs 51,000 crore.

As of Q1, the gross tax collections rose a mere 3% as a contraction in corporate tax collections was seen, before they were offset by the growth of personal income tax and GST collections. 

Of the other big spends, the government hopes to complete 60% of its capital expenditure target by September-end, the official quoted above said. The capex target in the Union budget 2023 was set at Rs 10 lakh crore, a 33% increase from last year.