Second Edition of the Status Paper Giving Detailed Analysis of the Government’s Debt Situation Released.

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....econd Edition of the Status Paper Giving Detailed Analysis of the Government’s Debt Situation Released. <br>Income Tax<br>Dated:- 6-3-2012<br><BR>Press Information Bureau Government of India Ministry of Finance 06-March-2012 15:04 IST Second Edition of the Status Paper Giving Detailed Analysis of the Government's Debt Situation Released &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In his Budget Speech for 2010-11, the Union Finance Minister Shri Pranab Mukherjee had announced his intention to bring out a status paper giving detailed analysis of the Government's debt situation and a road map for curtailing the overall public debt. The Finance Minister had also announced that this paper would be followed by an Annual Report on the subject. Accordingly, maiden edition of Government Debt Paper was released during 2010-11. The second edition of Status paper on Government Debt is released today. This is available on Ministry of Finance website www.finmin.nic.in and www.indiabudget.nic.in. Click here to see Government Debt DSM/SS/GN ============= Document 1 GOVERNMENT DEBT STATUS PAPER MARCH 2012 MINISTRY OF FINANCE DEPARTMENT OF ECONOMIC AFFAIRS NEW DELHI Conten....

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....ts Chapter Particulars Page No. 1. Introduction 1 2. Public Debt 5 3. Public Account Liabilities 17 4. Trends in Central Government Debt and Liabilities 23 5 5. Sustainability of Outstanding Government Debt and Future Financing Scenario in India 30 List of Tables Table No. Particulars Page No. 1.1 Debt Position of the Central Government 2 1.2 Components of Debt (as % of GDP) 3 2.1 Internal Debt Position of the Central Government 5 2.2 Maturity Profile of Government of India Outstanding Dated Securities 6 2.3 Maturity Trend of Dated Securities 6 2.4 Ownership Pattern of Government of India Dated Securities 7 2.5 Maturity and Yield of Central Government's Market Loan 8 2.6 Trends in outstanding auction T-Bills 9 2.7 Trends in External Debt 16 2.8 3.1 Trends in External Debt as proportion of Government Debt State Provident Fund 16 18 3.2 Special Securities issued in lieu of Subsidies 18 3.3 Reserve Funds - Bearing Interest 20 3.4 3.5 Major Components of Non-interest Bearing Reserve Funds Reserve Funds - Not Bearing Interest 20 3.6 Deposits - Interest Bearing and Not Bearing Interest 3.7 Advances 3.8 Public Accou....

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....nt 4.1 Debt Position of the Central Government 22222 20 21 21 23 4.2 Trends in Central Government Debt and Liabilities- with External Debt at current exchange rate 24 14 43 4.3 Trends in Central Government Debt and Liabilities with NSSF adjustment 25 4.4 4.5 Trends in Central Government Debt and Liabilities Trends in Central Government, State Government and General Government Debt and Liabilities 26 34 5.1 Weighted Average Maturity of Dated Securities 28 31 Table No. Particulars Interest payment as percentage of net tax revenue Debt Financing Scenario 5.2 5.3 5.4 Defict Financing Scenario II Page No. 32 34 34 Chart No. 2.1 2.2 2.3 2.4 List of Charts Particulars Yield and Maturity of Primary Issuances Trends on details of Outstanding Treasury Bills 14 Days Treasury Bills Trend in MSS Debt Page No. 8 4.1 Trends in Central Governmet Debt and Liabilities 122 9 10 27 List of Boxes Particulars Box No. Page No. 2.1 National Small Savings Fund 13 2.2 Reform measures in NSSF Administration 13 3.1 Issuance of Securities against Postal Life Insurance Schemes 18 3.2 Buy-Back of Fertilizer Bonds 18 888 5.1 Initiatives....

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.... of Reduction of Debt-utilisation of one off resources to contain debt 32 32 Annexes Annex No. Particulars I Office Memorandum II Page No. 36 39 III IV Central Government Outstanding Securities issued to NSSF Statement showing Maturity Profile of Market Loans including Floating Rate Bonds (FRBs) and Conversion of Special Securities as on 31st March, 2011 Statement showing Weighted Average Interest Rate of Interest (Maturity year wise) on Market Loans including FRBs, Conversion of Special Securities to Banks and Special Securities to others as on 31st, March, 2011 40 40 41 V VI W List of Government of India Securities Outstanding as on March 31, 2011 - Maturity Year Wise 42 42 List of Government of India Securities Outstanding as on March 31, 2011 - Interest Rate Wise 45 VII Donor-Wise Debt Outstanding of the Country as on 31st March, 2011 48 1 Introduction In the Budget speech for 2010-11, Hon'ble Finance Minister announced his intention to bring out a status paper giving detailed analysis of the government's debt situation and a road map for curtailing the overall public debt. He also announced that this paper would be followed by an ....

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....Annual Report on the subject. Accordingly a paper on public debt was brought out by the government during 2010-11. This paper covered both the status of public debt and liabilities with detailed analysis thereof as well as a road map for reduction in debt to GDP ratio for the period 2010-2015. Though information on government debt was available in a number of official publications, this paper on general government debt¹ helped in bringing out information in simplified and transparent manner. It also brought out uniformity in reporting of general government debt among various stakeholders. With the same objective of improving transparency in dissemination of information related to public debt, this second annual paper on public debt has been brought out. It reinforces the commitment of Government to implement prudent debt management strategies to ensure that the public debt remains within sustainable limits and does not crowd out private borrowing. Medium- term fiscal policy of the Government is driven by the principle of gradual reduction of public debt to GDP ratio so as to further reduce debt servicing risk and create fiscal space for developmental ex....

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....penditure. The overall objective of the Government debt management policy is to meet Central Government's financing need at the lowest possible long term borrowing costs and also to keep the total debt within sustainable levels. Additionally, it aims at supporting development of a well functioning and vibrant domestic bond market. In this Debt paper, for the purpose of GDP, the series for Advance Estimates 2011-12 released by CSO has been used. One of the key public debt management reforms under implementation is the establishment of a Debt Management Office in the Ministry of Finance. It is proposed to introduce necessary legislation in this regard in the ensuing Budget session for 2012-13. 1 It includes Central and State Governments' consolidated debt. In the Medium Term Fiscal Policy Statement which was presented along with the Budget 2011-12, it was estimated that the Central Government debt and liabilities² would be 45.3 percent of GDP at the end of March 2011. It was further estimated at 44.2 per cent of GDP at the end of 2011-12. In the medium term, as per the MTFP Statement the Government intended to reduce the level of public debt and liabilitie....

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....s to 41.5 per cent of GDP by the end of financial year 2013-14. The above intended roadmap for reduction in public debt may be seen in the context of 13th Finance Commission recommendations wherein Central Government was expected to bring down debt from 53.9 per cent of GDP in 2010-11 to 47.5 per cent at the end of 2013-14. As per the provisional accounts data for 2010-11, debt and liabilities of the Central Government as percentage of GDP has come down to 46.0 per cent at the end of 2010-11 from 48.9 per cent of GDP in 2009-10. This is a welcome reversal from the trends during the year 2008-09 (48.9 per cent of GDP) and 2009- 10 (it remained at the same level of 48.9 per cent of GDP) when debt and liabilities of the government went up due to the fiscal expansionary measures undertaken to insulate Indian economy from contagion of global financial crisis. The overall debt for Government of India includes debt and liabilities contracted in the Consolidated Fund of India (technically defined as Public Debt) as well as liabilities in Public Account³. Major proportion of overall debt of the Central Government at the end of March 2011 is domestic debt which is....

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.... at 92.1 per cent and external debt is 7.94 per cent as on March 2011. While public debt accounts for 83.4 per cent of Central Government's debt and liabilities; public account constitutes the balance of 16.6 per cent at the end of March 2011. Country's reliance on domestic debt has further increased as may be seen from external debt as percentage of GDP going down from 3.9 per cent in 2009-10 to 3.6 per cent in 2010-11. The overall debt and liabilities position of the Government of India as reported in the Receipts Budget 2011-12 along with provisional actuals for 2010-11 and also as a proportion of GDP is shown in the following tables: 2 This is net of NSSF and MSS liabilities not used for financing Central Governments' deficit and with External debt at current exchange rate. 3 In respect of receipts into the Public Account, the Government is acting as a Banker or Trustee and refunds the money on demand after completion of the implicit contract/event. 4 External debt constitutes 5.5 per cent of overall general government debt. 1 Government Debt: Status Paper Table 1.1: Debt Position of the Central Government COMPONENTS (crore) ACTUALS Provisional Estimate....

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....s 2005-06 2006-07 2007-08 2008-09 2009-10 RE 2010-11 2010-11 2011-12 BE OF DEBT A. PUBLIC DEBT (B+C) 1484001.33 1647690.71 1911682.10 2142886.77 2462422.05 2824753.92 2860191.25 3281464.94 B. INTERNAL DEBT (i+ii) 1389758.29 1544975.17 1799651.18 2019841.17 2328338.90 2667114.82 2703844.28 3110617.97 (i) Under MSS (a) Dated Securities 11000.00 22000.00 128317.00 79772.78 2737.00 0.00 0.00 20000.00 (b) Treasury Bills 18062.17 40973.95 42236.77 9000.00 0.00 0.00 0.00 0.00 Total (a+b) 29062.17 62973.95 170553.77 88772.78 2737.00 0.00 0.00 20000.00 (ii) Market Loans (a) Dated Securities (b) Treasury Bills 967676.32 1074604.07 1197371.61 1426501.59 1824925.95 2150340.42 2181152.24 2524152.24 91489.15 112901.40 140382.23 239978.53 230209.76 237968.93 240209.76 255209.76 (c) Compensation & Other Bonds 72761.37 62095.74 71325.13 47506.38 38731.52 31005.37 39986.86 35869.38 (d) Securities issued to (e) International Financial Institutions Securities against small savings Total (a+b+c+d+e) 25151.61 25798.49 24719.41 23085.34 24482.60 29314.81 17462.69 26171.40 203617.67 206601.52 195299.03 193996.55 207252.07 218485.29 225032.73 249215.19 1360....

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....696.12 1482001.22 1629097.41 1931068.39 2325601.9 2667114.82 2703844.28 3090617.97 94243.04 102715.54 112030.92 123045.60 134083.15 157639.10 156346.97 170846.97 C. External Debt D. Other Liabilities (a) National Small Savings Fund 413498.83 468009.62 478289.52 470140.77 521194.40 568614.40 481388.93 481483.14 (c) (b) State Provident Fund Other Account 66262.14 71439.92 75330.22 83377.44 99433.07 111946.78 109419.67 119419.67 186920.97 220160.41 245081.15 334091.29 327457.39 304697.07 338690.19 338966.30 (d) Reserve funds & Deposit Bearing Interest Not bearing interest Total (a+b+c+d) E. TOTAL LIABILITIES (A+D) 128761.74 141414.71 131354.99 109461.78 131295.30 127042.98 128681.74 119452.99 53649.96 62704.8 73055.56 78383.87 72874.68 70421.33 74054.10 77458.04 55811.82 68590.50 53987.42 50297.87 46578.31 58340.41 67360.61 53896.95 776143.72 890905.25 925743.87 1016291.24 1067537.85 1114019.99 1070913.50 1071224.10 2260145.05 2538595.96 2837425.97 3159178.01 3529959.90 3938773.91 3931104.75 4352689.04 2 Table 1.2: Components of Debt (as % of GDP) Introduction (in % of GDP) ACTUALS Provisional Estimates RE BE 2005-06 2006-07 2007-08 2008-09 2009-1....

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....0 2010-11 2010-11 2011-12 A. PUBLIC DEBT (B+C) 40.2 38.4 38.3 38.1 38.1 36.8 36.3 36.5 B. INTERNAL DEBT (i+ii) 37.6 36.0 36.1 35.9 36.1 34.8 34.3 34.6 (i) Under MSS (a) Dated Securities 0.3 0.5 2.6 1.4 0.0 (b) Treasury Bills 0.5 1.0 0.8 0.2 0.0 Total (a+b) 0.8 1.5 3.4 1.6 0.0 333 0.0 0.0 0.0 888 0.0 0.0 0.0 2220 0.2 0.0 0.2 (ii) Market Loans (a) Dated Securities 26.2 25.0 24.0 25.3 28.3 28.0 27.7 28.1 (b) Treasury Bills 2.5 2.6 2.8 4.3 3.6 3.1 3.0 2.8 (c) Compensation & Other Bonds 2.0 1.4 1.4 0.8 0.6 -0 0.4 0.5 0.4 (d) Securities issued to International Financial Institutions 0.7 0.6 0.5 -0 0.4 - 0.4 0.4 - 0.2 0.3 (e) Securities against small savings 5.5 4.8 3.9 3.4 3.2 2.8 2.9 2.8 Total (a+b+c+d+e) 36.8 34.5 32.7 34.3 36.0 34.8 34.3 34.4 C. External Debt at book value 2.6 2.4 2.2 2.2 2.1 2.1 2.0 1.9 D. Other Liabilities (a) National Small Savings Fund 11.2 10.9 9.6 8.4 8.1 7.4 6.1 5.4 of this, (i) Securities issued by States 10.6 10.5 9.2 8.2 7.5 6.9 6.1 5.4 (b) State Provident Fund 1.8 1.7 1.5 (c) Other Account 5.1 5.1 4.9 5.9 5....

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....55 1.5 1.5 5.1 445 1.5 ç«™ 1.4 1.3 4.0 4.3 3.8 (d) Reserve funds & Deposit 3.0 3.1 2.5 2.3 1.8 1.7 1.8 1.5 Bearing Interest 1.5 1.5 1.5 1.4 1.1 0.9 0.9 0.9 Not bearing interest 1.5 1.6 1.1 0.9 0.7 0.8 0.9 0.6 Total (a+b+c+d) 21.0 20.7 18.6 18.1 16.5 14.5 13.6 11.9 E. TOTAL LIABILITIES (A+D) 61.2 59.1 56.9 56.1 54.7 51.3 49.9 48.5 E1 TOTAL LIABILITIES (as reported in this paper) 52.5 49.4 46.2 48.9 48.9 46.0 45.3 44.2 3 Government Debt : Status Paper Internal Debt Internal Debt for Government of India largely consists of fixed tenure and fixed coupon borrowings (dated securities and treasury bills) which are issued through auction. Maturity profile of existing debt could be classified into three categories, namely - short, medium and long term having maturity of less than 1 year, from one year up to 7 years and more than years respectively. Government is striving to gradually increase the effective maturity of the outstanding stock of dated securities to minimise the roll over risk. The weighted average maturity of dated securities issued during the year 2010-11 was 11.62 years, up from 11.16 yea....

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....rs during 2009-10. For the issuance during 2011-125, the same has increased to 12.56 years. Most of these instruments carry fixed rate of interest; however, there is a small proportion of floating rate instruments benchmarked to treasury bill yields. External Debt External Debt is a small proportion of the overall public debt of the Government of India. It is largely used for financing specific projects at the Central and State levels. States are not permitted to contract external debt directly and therefore in the existing system all external debt (even those not used for financing Central Govt. projects) are first contracted in the Consolidated Fund of India and then on-lent to States. Most of the external debt is from Multilateral agencies such as IDA, IBRD, ADB etc. A small proportion of existing external debt comes from bilateral agencies. All these loans are generally long term variable rate loans linked to LIBOR. While calculating effective rate of interest for these loans, impact of exchange rate variation needs to be taken into account. Public Account Liabilities Liabilities in Public Account can be classified into two broad categories: viz. Inte....

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....rest and Non- interest bearing liabilities. These liabilities consist of National Small Saving Fund (NSSF), Provident fund, Deposit and Reserve funds and other liabilities. As per the provisional actuals for 2010- 11, public account liabilities' account for 16.6 per cent of overall liabilities of Central Government. Some of the liabilities in the public account like NSSF liabilities have accrued not exactly out of 5 End of December, 2011. the need for financing Central Government's deficit and therefore have to be netted off against matching assets while calculating the consolidated debt of the Country. As explained in the debt paper for 2010-11, certain components of liabilities which are backed with matching assets in liquid form and have not been acquired to finance deficit or get factored in both at central and state levels, have been accounted for or netted of as per the established convention. While reporting consolidated debt, items like loans from NSSF to States, Loans from Central Government to States, liabilities on account of 14-days treasury bills and Market Stabilisation Scheme (MSS) have been dealt with separately. Ambiguities with the earlie....

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....r system of disclosure have been explained in detail in the Debt Paper for 2010-11. The same principle has been followed in arriving at the consolidated debt for the general government in the present paper for 2011-12. The present crisis in Euro Zone regarding sovereign debt has brought into focus the importance of prudent fiscal management in running the economy. Any sustainability analysis in classical terms in the form of primary surplus and growth/interest rate differential may not be the sole tool to gauge the fiscal health of the country. Some of the important parameters for determining the stability and vulnerability level of public debt, for example, should include maturity profile, investor base along with savings rate, potential and composition, carrying cost, external or domestic realised tax to GDP ratio for that economy. It is once again re-emphasised that public debt in India is being largely funded through domestic savings at fixed interest rate; these attributes coupled with the facility of treating Government securities with special status in the form of maintenance of pre defined Statutory Liquidity Ratio (SLR) for Banks, provide improved ....

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.... sustainability in the medium to long term. Also, maturity profile of existing debt puts India at different footing from some of the other economies of the world who are facing roll over risks. With the introduction of further reforms in direct and indirect tax systems, the stress test on debt servicing for India also needs to factor in the potential tax to GDP ratio which would improve the debt servicing capacity in coming years. 6 This would require necessary correction while computing the consolidated debt for the country to remove inter-government transactions. 7 Net of NSSF liabilities not used for financing Central Government deficit. 8 With matching assets in the form of Special Securities issued by State Governments. 4 2 Public Debt Public Debt as percentage of GDP has shown steady decline from 42.1 per cent in 2005-06 to 36.9 per cent in 2007-08. This reduction in public debt as percentage of GDP is largely attributed to two factors; one, fiscal consolidation during the above mentioned period and two, high rate of growth of GDP on continuous basis in the above mentioned period. The corrective trend however underwent a reversal during 2008-09 and in ....

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....2009-10 as the fiscal deficit went up due to the counter cyclical measures undertaken by the Government to protect Indian economy from the adverse impact of global financial crisis. These measures enabled the government to arrest the moderation in the growth of economy, and consequently Indian economy grew at 8.4 per cent in 2009-10 after witnessing a growth of 6.7 per cent in 2008-09. However, the impact of moderation in growth coupled with higher fiscal deficit led to increase in public debt. The public debt to GDP ratio deteriorated from 36.9 per cent in 2007-08 to 39.9 per cent in 2009-10. With the resumption in the process of fiscal consolidation during 2010-11, Public Debt consists of both internal and external debts of the government. A. Internal Debt Out of the total public debt¹0 of 38.4 per cent of GDP at the end of 2010-11, internal debt of the central government stands at 34.8 of GDP amounting to 90.6 per cent of public debt. Internal Debt for Government of India largely consists of fixed tenure and fixed rate government papers (dated securities and treasury bills upto 364 days of maturity) which are issued through auction. The above two compo....

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....nents at 31.1 per cent of GDP constituted 89.4 per cent of internal debt; 81 per cent of total public debt of 38.4 per cent of GDP and 73 per cent of total debt and liabilities of the Central Government at the end of 2010-11. Other components of internal debt at the end of 2010-11 are securities issued towards NSSF against small savings (2.8 per cent of GDP constituting 8.0 per cent of internal debt, 7.3 per cent of Public Debt and 6.1 per cent of total debt and liabilities), securities issued to the international financial institutions (0.4 per cent of GDP constituting 1.1 per cent of internal debt, 1.0 per cent of Public Debt and 0.9 per cent of total debt and liabilities) and the balance are in the form of compensation and other bonds including floating rate bonds amounting to 0.4 per cent of GDP and constituting 1.1 per cent of internal debt, 1.0 per cent of Public Debt and 0.9 per cent of total debt and liabilities. wherein fiscal deficit of the Central Government was reduced from 6.6 per cent of GDP (inclusive of bonds issued in lieu of subsidy) in 2009-10 to 4.8 per cent of GDP, Public debt as percentage of GDP declined from 39.9 per cent to 38.4 per c....

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....ent. While reduction took place in overall debt as percentage of GDP, share of public debt in total debt has increased from 79.8 per cent in 2008-09 to 83.4 per cent in 2010-11. This shows larger reliance on market related instruments for deficit financing during 2010-11. Table 2.1: Internal Debt Position of the Central Government Trends in internal debt as percentage of GDP, both including and excluding debt raised under the Market Stabilisation Scheme, are shown below. Details of various components of internal debt have been explained in the following sections. ACTUALS Provisional (in % of GDP) Estimates RE BE 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2010-11 2011-12 INTERNAL DEBT (i+ii) 37.6 36.0 36.1 35.9 36.1 34.8 34.3 34.6 (i) Under MSS (a) Dated Securities 0.3 0.5 2.6 (b) Treasury Bills Total (a+b) (ii) Market Loans 0.5 1.0 0.8 0.8 1.5 3.4 68 4 1.4 0.0 0.0 0.0 0.2 0.2 0.0 0.0 0.0 0.0 1.6 0.0 0.0 0.0 0.2 2220 (a) Dated Securities 26.2 25.0 24.0 25.3 28.3 28.0 27.7 28.1 (b) Treasury Bills 2.5 2.6 2.8 4.3 3.6 3.1 3.0 2.8 (c) Compensation & Other Bonds 2.0 1.4 1.4 0.8 0.6 0.4 0.5 0.4 (d) ....

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....Securities issued to International Financial Institutions 0.7 0.6 0.5 0.4 0.4 0.4 0.2 0.3 (e) Securities against small savings 5.5 4.8 3.9 3.4 3.2 2.8 2.9 2.8 Internal Debt (a+b+c+d+e) 36.8 34.5 32.7 34.3 36.0 34.8 34.3 34.4 9 net of MSS (excluding liabilities in public account and including external debt at current exchange rate). 10 Public Debt is the debt contracted in the Consolidated Fund of India and does not include liabilities in public account. 5 Government Debt : Status Paper a. Market Loans - Dated Securities Dated securities, commonly known as market loans, constitute the most significant component of instruments which are used for financing the fiscal deficit of the Central Government. During 2010-11, net borrowing through this component was $3.25 lakh crore amounting to 4.2 per cent of GDP. This component was used to finance 87.5 per cent of the fiscal deficit during the year. It may be noted while BE 2010-11 had projected market borrowing of *3.45 lakh crore, the actual borrowing was restricted to Rs.3.25 lakh crore (net) due to higher receipts under non tax revenues. outstanding stock of dated securities at the end of 20....

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....10-11 decreased marginally to 9.64 years from 9.67 years as at the end of 2009-10. This marginal reduction in weighted average maturity may be seen in the the context of higher redemption during 2010-11. During 2011-12 (till the end of December 2011), the weighted average maturity of issued securities increased to 12.56 years and at the same time weighted average maturity of outstanding stock has increased to 9.66 years. At the end of 2010-11, the proportion of debt maturing in less than one year declined to 3.4 per cent from 6.2 per cent at the end of 2009-10. While debt maturing within 1-5 years increased from 22.7 per cent at the end of 2009-10 to 25.6 per cent at the end of 2010-11, proportion of debt maturing within 5-10 years has decreased from 38.0 per cent to 34.1 per cent in last one year. Proportion of debt maturing within 10-20 years has also increased from 17.9 per cent to 21.4 per cent at the end of 2010-11 and debt maturing above 20 years at the end of 2010-11 has increased marginally from 15.2 to 15.5 per cent of total stock. Government envisages to finance larger share of its fiscal deficit through dated securities without posing any systemic....

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.... risk of roll over. It is the endeavour of the Government to elongate the maturity profile of debt to reduce redemption pressure in short to medium term to aid the process of fiscal consolidation. During the year 2010-11, the weighted average maturity of issued securities increased to 11.62 years from 11.16 years in 2009- 10. However, the weighted average maturity of Table 2.2 :Maturity Profile of GoI Outstanding Dated Securities Maturity Buckets End-March 2011 End-March 2010s 1 2 Less than 1 year 3.4 6.2 1-5 Years 25.6 22.7 5-10 Years 34.1 38.0 21.4 17.9 15.2 3 10-20 Years 20 years and above 15.5 It may be seen from the above analysis that the proportion of debt maturing in less than 5 years at the end of 2010-11 remains almost at the same level of about 29 per cent as at the end of 2009-10. Table 2.3 :Maturity Trend of Dated Securities After accounting for issuance during 2011-12, till 3rd February, 2012 an analysis of redemption profile in the next 5 years of government dated securities is given in the following table: 2012-13 2013-14 2014-15 Maturity during the year Percentage of outstanding stock 90,616 95,009 1,68,018 3.6% 3.7% ....

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.... 6.6% Percentage of GDP 0.9% 0.8% 1.3% 2015-16 2016-17 1,97,244 2,31,130 7.7% 9.1% 1.3% 1.4% * Outstanding as on 6th Feb., 2012 This shows that over the next five years, on an average, about 6 per cent of outstanding stock needs to be rolled over every year, though the pressure on redemption increases significantly during 2014-15 to 2016-17. In the present global context, when sovereign debt roll over risk is posing some uncomfortable questions to the debt 6 managers, the average level of roll over volume at about 6 per cent of stock and about 1.1 per cent of GDP places India in a far better position with respect to the debt servicing requirement. Notwithstanding the above, government is continuing with policy of efforts to elongate the maturity profile to curtail the roll over risk. The longest maturity paper now floated is of 30 years. The Government of India in consultation with the RBI is determining the appropriate maturity basket for new issuances. The details of maturity profile of existing dated securities are given at Annex III. During the fiscal consolidation period i.e. 2004-05 to 2007-08, the stock of dated securities outstanding (net o....

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....f MSS) steadily declined from 26.9 per cent of GDP in 2004-05 to 24.0 per cent of GDP 2007-08. However, due to the fiscal expansion during 2008-09 and 2009-10, this has increased to 25.3 per cent in 2008-09, 28.3 per cent in 2009-10. With substantive fiscal consolidation during 2010-11, this has reduced to 28.0 per cent of GDP. It is necessary to continue the process of fiscal consolidation over the medium term to reduce the stock of dated securities. After the presentation of Budget 2011-12, macro- economic situation has changed significantly and Indian economy is estimated to grow at 6.9 per cent as against the earlier estimate of 9 per cent. Moderation in the growth in economy has resulted in lower realisation of tax revenues for the government. This coupled with changes in other financing items" for the government and increase in subsidy related expenditure, have necessitated increased reliance on market borrowing through dated securities during 2011-12. After the recent revision in market borrowing programme of the Central Government, net borrowing through dated securities in 2011-12 will increase from earlier estimated level of Rs.3,43,000 crore to 4,3....

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....5,872 crore. With this increase, the end of March 2012 stock of dated securities would go up to 29 per cent of GDP. Public Debt Though increased borrowings of the Central Government during 2011-12 have been conducted without disrupting the market, this level of increase in volume of dated securities is a matter of concern. Unless this issue is addressed, it may lead to hardening of yields and may also necessitate utilisation of future revenues more for interest payment. The government is alive to this issue which is sought to be tackled appropriately. The present level of stock of dated securities has also to be seen in the context of additional level of holding by commercial banks as against the existing floor mandated at 24 per cent of Net Demand and Time Liabilities (NDTL) as Statutory Liquidity Ratio (SLR) for these banks. As against the mandated requirement of 24 per cent of NDTL, commercial banks' holding under SLR category was 28.8 per cent at the end of March 2010. This has reduced to 27.1 per cent at the end of March 2011 and has further come down to 26.6 per cent as at the end of January 2012. Ownership pattern of Government of India dated securi....

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....ties shows that the share of commercial banks in the total outstanding Government of India securities, including the holding of banks acting as Primary Dealers, has dropped from 50.9 per cent in March 2008 to 47.0 per cent in March 2011. During 2011-12, the holding by commercial banks has increased slightly to the level of 47.9 per cent as at the end of September 2011. Following table shows the variation in ownership patterns during the period March 2009 to September 2011. Table 2.4: Ownership Pattern of Government of India Dated Securities Category 2009 Commercial Banks 38.9 39.3 38.8 39.2 38.0 2010 Mar. Jun. Sep. Dec. Mar. Jun. Sep. Dec. 38.4 38.8 38.6 38.4 37.6 37.2 2011 Mar. Jun. Sep. Bank-Primary Dealers 8.1 7.8 8.0 8.2 9.2 9.9 9.7 8.8 8.6 10.0 10.7 Non-Bank PDs 0.3 0.1 0.3 0.2 0.1 0.2 0.3 0.3 0.1 0.1 0.1 Insurance Companies 23.2 23.1 22.1 22.1 22.2 22.1 22.2 22.1 22.2 22.5 22.6 Mutual Funds 0.8 0.8 0.8 0.8 0.4 0.4 0.7 0.9 0.2 0.4 0.3 Co-operative Banks 2.9 3.1 3.1 3.2 3.4 3.4 3.5 3.4 3.4 3.3 3.3 Financial Institutions 0.4 0.4 0.3 0.3 0.4 0.3 0.4 0.3 0.4 0.3 0.4 Corporates 4.7 3.5 3.7 3.3 3.0 ....

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....2.8 2.6 2.3 1.9 1.9 1.6 FIIS 0.2 0.3 0.5 0.6 0.6 0.6 0.6 0.6 1.0 0.9 1.0 Provident Funds 6.6 6.4 6.3 6.5 6.8 6.6 6.8 6.9 7.1 7.0 7.2 RBI 9.7 11.1 10.6 10.2 11.8 9.7 9.2 10.7 Others Total 4.2 100.0 4.1 5.7 5.5 4.2 5.7 5.4 12.8 12.9 12.5 5.1 3.9 3.2 3.1 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 N.B.: (1) Government of India dated securities includes securities issued under the Market Stabilisation Scheme and the Special Securities like bonds issued to the Oil Marketing Companies, etc. (2) The data is provisional in nature and subject to revisions. The information on category-wise outstanding amounts of Government Securities is disseminated on an annual basis through the Handbook of Statistics on the Indian Economy published by the Reserve Bank of India.. "Small savings collection on net basis has shown significant decline from Budgeted level. In BE 2011-12, net small savings collection under NSSF was estimated at Rs.65,000 crore. However, it is (-) Rs.9,882 crore at the end of December, 2011. This has impacted liquidity under NSSF and in turn necessitated financing of cash mismatch under NSSF by Central Government.....

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.... 7 Government Debt : Status Paper Most of these dated securities carry fixed rate of interest. However, there is small proportion of floating rate instruments (less than 3 per cent of dated securities) whose coupon is benchmarked to cut-off yield in Treasury bill auctions. The weighted average coupon of dated securities was 7.81 per cent at the end of March 2011. It has increased to 7.84 per cent at the end of December 2011. This increase is due to hardening of yields during 2011- 12. The weighted average yield for issuance upto 3rd February 2012, during 2011-12, was at 8.54 per cent as against 7.9 per cent during the corresponding period of 2010-11. The trends on yield and maturity pattern of primary issuances of dated securities are shown below: Chart 2.1: Yield and Maturity of Primary Issuances 18 16 14 12 10 8 6 4 2 0 -Yield (%) Maturity (Yrs) * !!!!!!!! ! ! ! ! ! ! ! upto 31.10.2010 The details of existing dated securities with coupon rate are given in Annex IV. Analysis of the information therein shows that at the end of March 2011, 18.9 per cent of existing dated securities have fixed coupon rate of upto 7 per cent; 42.1 per cent carry ....

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....coupon rate of more than 7 per cent and upto 8 per cent; 26 per cent carry coupon rate of above 8 per cent and upto 9 per cent; and 13 per cent of total dated securities carry interest rate of more than 9 per cent and up to 12.6 per cent. Balance 3 per Table 2.5: Maturity and Yield of Central Government's Market Loan cent of existing dated securities are floating rate instruments. This reflects that 61 per cent of the existing dated securities carry interest rate of up to 8 per cent. It would be the endeavour of the government to further reduce the cost of borrowings by taking further reform measures in debt management. Issues during the year Weighted Average The details of maturity and yield of Central Government's dated securities in the recent years are given in the following table: Outstanding Stock Weighted Average Weighted Average Maturity (Years) 8 Year Weighted Average Yield (%) Maturity (Yrs) Coupon (%) 2003-04 5.71 14.94 9.30 9.78 2004-05 6.11 14.13 8.79 9.63 2005-06 7.34 16.9 8.75 9.92 2006-07 7.89 14.72 8.55 9.97 2007-08 8.12 14.9 8.50 10.59 2008-09 7.69 13.81 8.23 10.45 2009-10 7.23 11.16 7.89 9.67 2010-11 2....

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....011-12 7.92 11.62 7.81 6.64 (end December 2011) 8.57 12.56 7.84 9.66 crore The most critical factor impacting Central Government's market borrowing is the level of fiscal deficit from year to year. Lower fiscal deficit of both Centre and States would ease the pressure on market liquidity. However, if the combined fiscal deficit remains high, there would be need to consider other sources of deficit financing, so that the private sector credit needs do not get crowded out. a. Treasury Bills (91,182 and 364 days) Public Debt its short term cash flow mismatch and at the same time also provide opportunities for short term investment for financial institutions. Rates of these instruments also help in establishing a benchmark for short term rates in the economy. Apart from funding the temporary mismatches between cash inflow and outflow during a financial year, these instruments could also be used for financing desired level of cash build up at the end of financial year to take care of immediate requirement of cash in the coming quarter of next financial year. 91-days, 182-days and 364-days Treasury Bills are issued under the regular auction programme o....

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....f the Government. While 91-days treasury bills are normally auctioned every week; 182 and 364 days treasury bills are put to auction every fortnight. The notified amounts for the coming quarter are fixed in advance in consultation with the RBI. These instruments help the government in meeting Table 2.6 : Trends in outstanding auction T-Bills In the recent years, with the increase in absolute size of government expenditure budget including debt redemption and devolution of Central taxes to States, the volume of treasury bill financing in absolute terms has also increased significantly. Actuals Provisional (in crore) Estimates 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 RE BE 2010-11 2011-12 Auction Treasury Bills percentage of GDP 52150 73426 71752 141316 134542 134869 151226 166226 1.4 1.7 1.4 2.5 2.1 1.8 1.9 1.9 shortfall in other financing items and for meeting the cash requirements ¹² of the initial weeks of 2012- 13, net financing from auction treasury bills during 2011-12 has been revised at Rs.1,17,000 crore. With this level of financing, the estimated stock at the end of March 2012 would increase to 4.0 per cent of GDP. ....

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....However, as percentage of GDP, it has gradually declined from high of 2.5 per cent in 2008-09 to 2.1 per cent in 2009-10 and 1.8 per cent in 2010-11 which is 3.9 per cent of total debt and liabilities of the Central Government. In BE 2011-12 net financing of Rs.15,000 crore was assumed from these instruments. However, due to Chart 2.2 Trends on details of outstanding Treasury Bills 100000 3.00 90000 Ж 2.50 80000 70000 60000 50000 2.00 -✗ 1.50 Ж 40000 1.00 30000 20000 0.50 10000 0.00 0 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 (BE) (Prov.) 91 Day 182 Day 364 Day - -*- - Treasury Bills (aggregate; right scale) 12 In the first 5 weeks of 2012-13, redemption of 59,000 crore of dated securities is scheduled. 9 Per cent of GDP Government Debt: Status Paper Depending on the evolving macro-economic situation and interest rate scenario, government decides on the mix of dated securities and treasury bills for deficit financing. In the event of high inflation, it may be prudent to raise more short term debt with due consideration on roll over risk so as transactions. The rate of interest for this instrument had be....

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....en at five¹4 per cent per annum. Liquidity at the state level has improved significantly during the last 6-7 years resulting in significant increase in surplus cash balances of to avoid contracting long term debt at higher Means advances from the RBI. The surplus cash States. States are now less dependent on Ways and interest rates. c. 14 Days Treasury Bills 14-days Intermediate Treasury Bills are used by Central Government for deployment of short term cash surpluses available with State Governments 13 at the end of their daily Chart 2.3 : 14 Days Treasury Bills 120000 balances of State Governments have increased steadily from Rs.7,184 crore at the end of March 2004 to 1,03,100 crore in March 2011 amounting to 1.3 per cent of GDP for 2010-11. Trends in recent years on outstanding 14 days Treasury Bills are shown below: 100000 80000 60000 2.00 1.80 1.60 1.40 1.20 1.00 $0.80 0.60 0.40 0.20 0 0.00 2005-06 2006-07 2007-08 2008-09 2009-10 2010- 11(prov.) 2011-12 (BE) 40000 20000 ✓ Amount (crore) Although this instrument was for deployment of temporary cash surpluses of States; over the years, accumulation under this instrument has....

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.... assumed a more durable nature. Central Government has practically no control over the accumulation of this component of debt. Over the medium term, this component of investment which is a kind of reverse flow from State Governments to Centre needs to be reduced. This investment in 14-days Treasury Bills beyond the temporary cash surplus results in negative return for States. It would be a desired step for States to factor in this resource while finalising their borrowing plan for financing the fiscal deficit in coming years. Huge accumulations in 14-days Treasury Bills pose a risk for the Central Government due to its unpredictable nature. In the scenario of State Governments suddenly drawing down on these %age of GDP (right scale) investments, the Central Government has to quickly refinance this cash outgo from new borrowings. While consolidating the general government debt, this component of 14-days Treasury Bills needs to be netted out from State Governments' debt as this is in the form of inter-government transaction. d. Cash Management Bills During 2009-10 the Government of India, in consultation with the Reserve Bank of India, has introduced a new....

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.... short-term instrument, known as Cash Management Bills (CMBs), to meet the temporary cash flow mismatches of the Government. The Cash Management Bills are non- standard, discounted instruments issued for maturities less than 91 days. These instruments 13 Apart from State Governments, Union Territory of Pondicherry also invests surplus cash in 14-days Treasury Bills. 14 Interest rate is fixed as 100 basis points (1%) lower than the Bank Rate of RBI. 10 have the generic character of Treasury Bills. However, the Non-Competitive Bidding Scheme for Treasury Bills is not extended to the Cash Management Bills. The tenure, notified amount and date of issue of this instrument depend upon the temporary cash requirement of the Government arising from sudden or unanticipated developments. During 2011-12, government had to actively use this instrument for meeting the mismatch in cash flow due to higher direct tax refunds in the beginning of the financial year and shortfall in small savings collection during the year. Gross amount of 93,000 crore was raised through this instrument during the financial year 2011-12 on 14 occasions. There is no outstanding amount of CMB le....

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....ft at the end of December 2011. e. Special Securities - Special Securities converted into Marketable Securities Upto 1997, the Government of India used to Public Debt f. Securities issued to International Financial Institutions These securities are issued to the International Monetary Fund, International Bank for Reconstruction and Development, International Development Association, Asian Development Bank, African Development Fund & Bank and International Fund for Agricultural Development. These special securities are issued primarily towards i. India's subscriptions/contributions to these institutions; ii. Special Drawing Rights (SDRs) for subscribing to India's quota increase in the IMF; iii. iv. maintenance of value obligations to IMF, and purchase transactions under the Financial Transaction Plan. These liabilities are non-interest bearing in nature. issue ad hoc treasury bills to the RBI for financing The total outstanding value of these rupee of deficit¹5. Periodically, the accumulated ad hoc treasury bills were converted as special securities at a fixed interest rate of 4.6 per cent. These rates were not determined through market auction. T....

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....o correct this anomaly, the special securities were gradually converted to marketable securities carrying coupon rate in line with prevailing secondary market rate for matching maturity. Government of India has completed the conversion of existing special securities during 2003-04. The outstanding stock of these securities at the end of March 2011 is 76,817.95 crore amounting to 1.0 per cent of GDP. The weighted average coupon rate and maturity for these securities are 6.33 per cent and 10.07 years respectively. The Government of India has also completed the conversion of Recapitalisation Bonds with the Nationalised Banks into marketable securities during the year 2007-08. The outstanding stock under this category at the end of March 2011 is *20,808.75 crore amounting to 0.3 per cent of GDP. The weighted average coupon rate and maturity for these securities are 8.25 per cent and 16.2 years respectively. securities issued to International Financial Institutions as at the end of March 2011 is *29,314.81 crore amounting to 0.4 per cent of GDP. g. Compensation and other Bonds Various types of interest carrying bonds were issued in the past by the Government o....

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....f India. Some of these bonds were also open for retail subscription. These bonds carry fixed rate of interest depending on the prevailing interest rate; however, these rates were not determined through market auction. This component of liability has been reduced from Rs.72,760.38 crore in 2005-06 amounting to 2.0 per cent of GDP to Rs.30,692.90 crore at the end of March 2011 and it amounts to 0.4 per cent of GDP. h. Market Stabilisation Scheme (MSS) The Market Stabilization Scheme to assist Reserve Bank of India for sterilisation of its exchange market intervention was started in 2004-05. This scheme is governed by the Memorandum of Understanding between the Central Government and RBI. The MoU provides for borrowings in addition to the normal borrowings of the Centre to finance its deficit. The borrowings under this 15 It may be noted that section 5 sub section (1) read with sub section (3) of the FRBM Act prescribes that the Central Government shall not borrow from the RBI with effect from 1st April 2006. This means that the RBI can't subscribe to the primary issues of the Central Government securities. 11 Government Debt : Status Paper scheme are conducte....

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....d with the intention of absorbing excess liquidity from the system arising on account of large inflow of foreign exchange. The proceeds so realised from these borrowings are sequestered in a separate cash account with RBI and are not used for purpose other than redemption Chart 2.4 : Trend in MSS Debt 180000 160000 of dated securities or treasury bills raised under this scheme. However the interest payments are met by the Government. Trends in recent years on outstanding liabilities under this scheme are shown below: 4.00 140000 120000 100000 80000 60000 3.50 + 3.00 2.50 2.00 1.50 1.00 40000 0.50 20000 0 0.00 2005-06 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 (prov.) 2011-2012 (BE) Amount (in crore of Rupees) The above trend shows that outstanding liabilities under MSS increased sharply to 3.4 per cent of GDP in 2007-08. This in turn increased the reported debt and liabilities of GoI to that extent and negated the impact of fiscal consolidation which actually reduced the debt to GDP ratio for the period 2004-05 to 2007-08. There are no outstanding liabilities under this scheme at the end of March 2011. The estimated MSS borrowin....

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....g in BE 2011-12 is Rs.20,000 crore; however, there is no utilisation under this scheme during 2011-12. Liabilities on this account are difficult to predict in medium term and consideration of this as a normal debt would destabilise the targeted reduction of debt over GDP under fiscal consolidation. While reporting the general government debt and liabilities, this component has to be dealt with separately for the following reasons: i. This is not used for financing the deficit of Gol; 16 See Box 2.1 for small saving schemes and prevailing interest rates. % age of GDP (right scale) ii. Proceeds from these borrowings are sequestered in a separate cash account with RBI and the government has no access to use this cash; iii. Whenever a decision on de-sequestering of certain amount takes place and cash is transferred from the MSS cash account to normal cash account of the Government, an equivalent amount of securities issued under MSS would form part of the normal debt of the government. a. Securities against small savings (National Small Saving Fund) All deposits under small savings schemes¹6 are credited to the “National Small Savings Fund" (NSSF)....

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...., established in the Public Account of India with effect from 1.4.1999. All withdrawals by the depositors are made out of the accumulations in this Fund. The balance in the Fund is invested in special Government securities of States and Centre as per norms decided from time to time by the Central Government. 12 Public Debt Box 2.1: National Small Savings Fund Instrument Current Rate (%) during 2011-12 Revised Rate (%) With effect from 1.12.2011 Savings Deposit 3.50 4.0 1 year Time Deposit 6.25 7.7 2 year Time Deposit 6.50 7.8 3 year Time Deposit 7.25 8.0 5 year Time Deposit 7.50 8.3 5 year Recurring Deposit 7.50 8.0 5-year SCSS 9.00 9.0 5 year MIS 8.00 (6 year MIS) 8.2 5 year NSC 8.00 (6 year NSC) New Instrument 8.00 8.4 8.7 8.6 10 year NSC PPF Small savings collections (net) are shared between the States and the Centre in the ratio of 80:20 with the option to the States to take upto 100 per cent of their net collections from 1st April, 2007. This sharing pattern would undergo a change from 1st April 2012 in pursuance of Government's acceptance of the recommendations of the Committee for comprehensive review of NSSF. The lia....

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....bility of outstanding balances under various small savings schemes at the close of 31st March, 1999 was borne by the Central Government by treating the same as investment of NSSF in special Central Government securities. During 1999-2000 to 2001-2002, 80% and 20% of the net collections (gross collections minus withdrawals by depositors) were invested by National Small Savings Fund in special securities issued by the State and Central Governments respectively. However, during 2002-03 to 2006-07, 100 per cent of net collections were invested in special securities issued by the various State/UT governments. Box 2.2: Reform measures in NSSF administration NSSF administration and guidelines have undergone major reforms during 2011-12. A synopsis of this reform measure is shown in Box 2.2. The Thirteenth Finance Commission in its Report had, inter alia, recommended that all aspects of the design and administration of the NSSF be examined with the aim of bringing transparency, market linked rates and other much needed reforms to the scheme. As a follow up of this recommendation, the Government had constituted a Committee on 8th July, 2010, headed by Smt. Shyamala Gopi....

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....nath, the then Deputy Governor, Reserve Bank of India for comprehensive review of NSSF. The terms of reference of the Committee included review of the existing parameters for the small saving schemes in operation and recommend mechanisms to make them more flexible and market linked; review of the existing terms of the loans extended from the NSSF to the Centre and States and recommend on the changes required in the arrangement of lending the net collection of small savings to Centre and States; review of other possible investment opportunities for the net collections from small savings and the repayment proceeds of NSSF loans extended to States and Centre; review of the administrative arrangement including the cost of operation; and review of the incentives offered on the small savings investments by the States. The recommendations of the Committee were considered in detail. Following are certain decisions which would change the administration of NSSF in coming years:- 1. Interest Rates on Small Savings Instruments a) Interest rate on Post Office Savings Account has been revised from 3.5 per cent to 4 per cent with effect from 1.4.2011. b) The rate of interest on all ....

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....other small savings schemes will be aligned with G-Sec rates of similar maturity, with a spread of 25 basis points (bps) with two exceptions. The spread on 10 year NSC (new instrument) will be 50 bps and on Senior Citizens Savings Scheme 100 bps. 13 Government Debt: Status Paper c) The interest rates for every financial year will be notified before 1st April of that year. 2. Investments from NSSF a) The minimum share of States in net small savings collections in a year, for investment in State Governments Securities, will be reduced from 80% to 50%. The remaining amount will be invested in Central Government securities or lent to other willing States or in securities issued by infrastructure companies/agencies, wholly owned by Central Government. b) Yearly repayment of NSSF loans made by Centre and States will be reinvested in Central and State Government securities in the ratio of 50:50. c) The period of repayment of NSSF loans by Centre and States will be reduced from 25 years with 5 years moratorium to 10 years, with no moratorium. d) Interest rate on existing investments from NSSF in Central Government securities till 2006-07 will be re-set at 9% and on those fr....

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....om 2007-08 till 2010-11 will be re-set at 9.5%. This is in line with the recommendations of the 13th Finance Commission for NSSF investments in State Government securities. This re-setting would result in additional interest payment by Central Government to the extent of 1,000 crore every year. e) Half yearly payment of interest by the Centre and the States will be introduced. 3. Operational Issues of NSSF A Monitoring Group drawn from Ministry of Finance, Reserve Bank of India, Department of Posts, State Bank of India, other select banks and select State Governments will be set up to resolve various operational issues like reducing the time lag between collection and investment, etc. 4. Certain features of various small savings instruments regarding maturity period, investment limits and liquidity were rationalized. 5. Commission rates to small savings agents were also rationalized. A copy of the office memorandum issued by the Government in this regard is at Annex I. The sums received in NSSF on redemption of special securities are continued to be reinvested in special Central Government securities, depending on the cash requirement of NSSF during the year. The....

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.... special Central Government securities issued to NSSF constitute a part of the internal debt of the Government of India under the consolidated fund. At the end of March 2011, the outstanding liabilities in the form of special Central government securities is Rs.2,18,485 crore amounting to 2.8 per cent of GDP and 6.2 per cent of total debt and liabilities of Central Government. There are three kinds of the Central Government Special Securities issued under NSSF: 1) Against outstanding balance as on 31st March, 1999 subsequent to the creation of NSSF in Public Account: These are the liabilities contracted when the government decided to shift small savings liabilities from the Consolidated Fund of India to the Public Account of India with effect from 1st April, 1999. These liabilities amounted to *1,76,221 crore. However, from time to time, some 14 of these liabilities have been prepaid. Till the end of March 2011, prepayment to the extent of *1,02,652 crore has been done. The outstanding balance as on 31st March 2011 under this liability is Rs.73,569 crore amounting to 1 per cent of GDP. This liability is in the nature of perpetual bonds carrying interest r....

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....ate of 10.5 per cent. Based on the decision taken on the recommendations of the Shyamala Gopinath Committee, interest rate on these instruments are now being re-set at 9 per cent. Details of existing securities are shown in the Annex II. 2) Against net collections during the year based on the existing sharing pattern between Central and State Governments as decided from time to time: Pursuant to the recommendations of the sub- committee of the National Development Council (NDC), the sharing pattern of net small savings collections was revised with effect from 1st April, 2007. During 2011-12 also it is continued to be shared between the States and the Centre in the ratio of 80:20 (vis-a-vis the earlier arrangement of 100 per cent transfer of collections to the State Governments) with the option to the States to take upto 100 per cent of their collections. The debt against these special securities is for a period of 25 years. These have to be repaid in 20 equal annual instalments after 5 years of moratorium. These instruments carry interest rate notified from time to time. Interest at the rate of 9.50 per cent per annum is being paid on the special securiti....

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....es issued against net collections since 1st April, 200317. At the end of March 2011, the outstanding liabilities under this category are *34,562 crore amounting to 0.45 per cent of GDP. The details of existing special securities are shown in the Annex.II With effect from 2012-13, based on the decision taken on the recommendations of the Shyamala Gopinath Committee, the minimum share of States in net small savings collections in a year, for investment in State Governments Securities, will be reduced from 80% to 50%. The remaining amount will be invested in Central Government securities or lent to other willing States or in securities issued by infrastructure companies/agencies, wholly owned by Central Government. Further, these securities will be issued with a maturity period of 10 years for both Centre and States with no moratorium. These instruments will carry interest rate notified from time to time. Interest rate on existing investments from NSSF in Central Government securities till 2006-07 will be re-set at 9% and on those from 2007-08 till 2010-11 will be re-set at 9.5%. 3) Against sums received on redemption of special securities of Central and Sta....

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....te Governments The sums received in NSSF during the financial year on redemption of special securities issued by Central and State Governments are reinvested in special Central Government securities with a maturity period of 20 years. These securities are issued at market rate of interest of matching maturity in the secondary market for the relevant financial years. During the period 2002-03 to 2004-05, the proceeds received from prepayment of liabilities in the Public Debt category (1) above were also reinvested in this category at market determined rate of interest. At the end of March 2011, the outstanding liability under this category is Rs.1,10,354 crore amounting to 1.4 per cent of GDP. The details of existing special securities with applicable interest rates are shown in the Annex II With effect from 2012-13, based on the decision taken on the recommendations of the Shyamala Gopinath Committee, yearly repayment of NSSF loans made by Centre and States, will be reinvested in Central and State Government securities in the ratio of 50:50. The period of repayment of these securities by Centre and States will be reduced to 10 years, with no moratorium. F....

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....or 2011-12, the prevailing interest rate of 9.5% will continue. From 1st April, 2012 revised interest rate will be notified. B. External Debt The Central Government is mandated under the Article 292 of the Constitution of India to borrow upon the security of the Consolidated Fund of India within such limits, if any, as may from time to time be fixed by Parliament by law. This provides the authority to the Central Government to borrow from within as well as outside the territory of the Country 18. The Central Government receives external loans largely from multilateral agencies and to some extent from friendly foreign countries also. The total outstanding external debt as on 31st March 2011 for the Central Government has increased to 2,78,877 crore from Rs. 2,49,306 crore (US $ 55.27 billion) as at the end of March 2010. This is calculated on the prevailing exchange rate as on 31.3.2011 (Rs.44.70 per US $). External debt as at the end of March 2011 has declined to 3.6 per cent of GDP from 3.9 per cent of GDP as at the end of March 2010. This amounts to 7.8 per cent of Central Government's debt and liabilities and 5.9 per cent of General Governments' overall ....

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....debt and liabilities. The trends in external debt at book value and current exchange rate are shown in the following table. 17 The 13th Finance Commission has recommended to reduce the interest rate to 9 per cent for NSSF loans to States contracted upto 2006-07 and outstanding as on 31st March 2010. The Government has accepted this recommendation in principle. 18 Executive power of State Governments extends only to borrow within the territory of India as per the Article 293 of the Constitution. 15 Government Debt : Status Paper Table 2.7: Trends in External Debt Actuals Provisional 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 1. External Debt (at Book Value) percentage of GDP 94243 2.6 102716 2.4 112031 123046 2.2 2.2 134083 157639 2.1 2.1 2. External Debt (at current Value)* percentage of GDP 194070 5.3 201199 4.7 4.2 210086 264062 4.7 249306 3.9 278877 3.6 *Exchange rate as on 31st March of respective years It may be seen from the above that external debt (at current exchange rate) as percentage of GDP has consistently declined during the period 2005-06 to 2010-11, except for the period 2008- 09. There is continued less relian....

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....ce on external debt for financing of deficit. This attribute of Indian debt has augured well in the context of present world wide discussion on sustainability of sovereign debt. Lower level of external debt coupled with the nature of outstanding external debt, which is largely on concessional terms from Multilateral Institutions and friendly countries, puts India at relatively comfortable level compared to equally indebted countries. Out of this external debt, about 66.3 per cent is from Multilateral 19 Institutions which are largely on concessional terms with long maturity. Apart from the Multilateral Institutions, external debt has also come from friendly countries for development projects. As per the extant policy on Bilateral Development Cooperation, Bilateral Development Assistance which inter alia includes loans is presently being accepted only from all G-8 countries 20 as well as the European Commission. The details on agency wise outstanding external loans as on 31.3.2010 are shown in the Annex VII. Over the years, proportion of external debt in the overall general government debt has declined consistently. Table 2.8: Trends in external debt as pr....

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....oportion of government debt External Debt Actuals 2005-06 2006-07 2007-08 2008-09 2009-10 Provisional 2010-11 percentage of Central Government debt percentage of General Government debt 10.0% 9.5% 9.1% 9.6% 7.9% 7.9% 6.7% 6.3% 6.1% 6.6% 5.5% 5.5% Proportion of external debt in the Central Government debt has declined from 10% in 2005- 06 to 7.9% in 2010-11 and the same has declined from 6.7% to 5.5% as proportion of general government debt. With gradual decline in net inflow from Multilateral Institutions in the coming years (in view of their exposure norms), government would have the option of exploring other sources of external debt to maintain a reasonable mix of domestic and external debt in its portfolio. 19 IDA, IBRD, ADB 20 USA, UK, Japan, Germany, France, Italy, Canada and Russian Federation. 16 3 Public Account Liabilities According to Article 266(2) of the Constitution I. Small Savings, Provident Funds, of India, all Public Money received by or on behalf of the Government of India, other than those which are for credit to the Consolidated Fund of India, shall be credited to the Public Account of India. The receipts into the Publi....

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....c Account and disbursements out of it are generally not subject to vote by the Parliament. In respect of receipts into the Public Account, the Government is acting as a Banker or Trustee and refunds the money on demand after completion of the implicit contract/event. Receipts under public account mainly come from the sale of small savings instruments²¹ which form part of the NSSF liabilities, contribution into General Provident Fund by government employees, Security and other Deposits received by the Government including special securities issued in lieu of subsidies to oil marketing companies, fertiliser companies, Food Corporation of India etc. and proceeds into other Funds and Reserves maintained in the Public Account. Some of the liabilities in the public account are interest bearing as government uses this resource for deficit financing and accordingly the Government has to credit interest from the Consolidated Fund of India at the pre defined rates on the amount outstanding in the Public Account. The Public Account also includes various suspense and remittance heads which are used for temporary transaction and to settle payments on account of in....

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....ter governmental transactions. Public Account is broadly divided into six sub-divisions which are explained in this chapter. 21 Refer Box 2.1 for various instruments â–  â–  â—‰ â—‰ â—‰ Insurance and Pension Funds, Special Deposits and Accounts etc. This largely consists of liabilities under National Small Savings Fund (NSSF); State Provident Funds consisting of General Provident Fund, Defence Services Officers and Personnel Provident Funds, State Railways Provident Fund etc.; Postal Insurance and Life Annuity Fund, Employees' Group insurance Scheme; Special Deposits by Provident, Superannuation and Gratuity Funds; and Special securities issued to various organizations like Oil Marketing Companies, Fertiliser companies, Food Corporation of India, Unit Trust of India, IDBI etc. Except for the NSSF liabilities, details of which are explained in the following section, all the above components are interest bearing liabilities for the Government of India. Interest rates for provident funds are fixed from time to time 22 by the Government of India whereas interest rates for special securities are fixed at the time of issuance. Liabil....

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....ities on account of securities issued in lieu of subsidies had increased significantly during 2005-06 to 2008-09. From 2009-10, Government has paid the subsidy commitments in cash, except for roll over liabilities on petroleum subsidy for 2008-09 in 2009-10. State Provident Funds The trends in the above liabilities from 2005-06 are shown below: 22 Presently interest rate on General Provident fund is 8 per cent per annum 17 Government Debt: Status Paper Table 3.1: State Provident Funds 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 BE 1. State Provident Funds 66262 Percentage of GDP 71440 1.8 1.7 75336 1.5 83377 1.5 99433 1.5 111947 119420 1.5 1.3 Over the years, this component has been at around 1.5 per cent of GDP. Interest rate of this liability is administered by the Central Government which is 8 per cent for the year 2010-11. Special Securities issued in lieu of Subsidies Certain payments on account of various subsidies were made in the form of bonds in the past. This policy has been changed from 2009-10 and all payments related to subsidies are made in cash. Liabilities on account of bonds issued in lieu of subsidies are par....

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....t of public account liability as special deposits from respective public sector undertakings/ private companies/autonomous bodies. These liabilities carry fixed interest rate, which are market linked as per their issuance period. Trends in these liabilities are shown in table 3.2 below: Table 3.2: Special Securities issued in lieu of Subsidies Special securities (in lieu of subsidy payment) Percentage of GDP 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 BE 26611 66934 0.7 1.6 94988 1.9 177587 3.2 187887 2.9 182124 2.4 171124 2.0 Of this, Oil Marketing companies (Petroleum Bonds) 26611 Percentage of GDP 0.7 50734 1.2 Food Corporation of India 0 16200 71288 1.4 16200 133887 2.4 16200 Percentage of GDP 0.0 0.4 Fertilizer companies 0 0 Percentage of GDP 0.0 0.0 0.3 7500 0.2 0.3 27500 0.5 144187 2.2 16200 0.3 27500 0.4 144187 1.9 140187 1.6 16200 0.2 16200 0.2 21737 0.3 14737 Box 3.1: Issuance of Securities against Postal Life Insurance Schemes As a reform measure to reduce administered rate instruments in the public account of India, Government has decided to freeze the corpus of Post Office ....

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....Life Insurance Fund (POLIF) and Rural Post Office Life Insurance Fund (RPOLIF) lying in public account with effect from 31.10.2009 and convert them into dated securities over a period of three years starting from 2010-11 in consultation with RBI. Interest accrued upto 31st October 2009 had been credited in the fund in Public Account and further interest accrued after this date on the frozen corpus is being paid in cash. During 2010-11, liabilities of 7,000 crore were converted into Special Securities and this forms part of the internal debt of the Central Government. The liabilities in public account have been reduced accordingly. Refer Box 2.1 for PPF interest rate reform 18 Box 3.2: Buy-back of Fertilizer Bonds 0.2 At the beginning of 2010-11, 27,500 crore was the outstanding amount of fertilizer bonds which were issued in 2007-08 and 2008-09. During 2010-11 and 2011-12, 14,000 crore of fertilizer bonds were considered for buy-back in two tranches of 7,000 crore each. On 31st March, 2011 in the first tranche, bonds with face value of 5762.98 crore and on 26th July, 2011 bonds with face value of 6,032.30 crore were bought back. This helped in reducing t....

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....he government liability by 11,795.28 crore in public account, as one off receipt from 3G and BWA spectrum auction in 2010-11 were utilized to redeem this debt. National Small Savings Fund (NSSF) NSSF was established in the Public Account of India with effect from 1st April, 1999 and all deposits under small saving schemes are credited to this fund. All withdrawals by the depositors are made out of the accumulations in this Fund. The balance in the Fund is invested in special State and Central Government securities as per norms decided from time to time by the Central Government. Interest payment on Special Central and State Government securities is an income of the Fund while the cost of the interest paid to the subscribers and cost of management of small savings schemes are expenditure of the Fund. The special Central Government securities issued to NSSF constitute a part of the internal debt of the Government of India. This has been explained in detail in Chapter II. After factoring in liabilities from NSSF included in the Internal Debt of the Government of India, the balance liabilities of NSSF are presently shown as liabilities in the Public Account ....

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....of India. However, as explained in the Chapters II and IV of this paper, these outstanding liabilities in the Public Account under NSSF are not used for financing the deficit of Central Government. At the same time, these liabilities are matched with assets held as securities issued by State Governments towards NSSF. Therefore these liabilities are not included as part of the Central Government liabilities for analysis in this paper. II. Reserve Funds Reserve Funds in Public Account are constituted by the Central and State Governments under statutory provisions or otherwise. These funds are created with the objective of expending money accumulated under the funds on the specific and particular purposes for which they have been constituted. Reserves or Reserve Funds may be classified under the following three categories according to the sources from which they are funded:- (i) Funds accumulated from grants made by another Government and at times aided by public subscriptions (examples are relief funds etc.), Public Account Liabilities (ii) Funds accumulated from sums set aside by the Central or State Governments from the Consolidated Fund of India or the C....

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....onsolidated Fund of the State, as the case may be, to provide reserves for expenditure to be incurred by themselves on particular purposes, (for example, the various Depreciation or Renewal Reserve Funds created in respect of commercial departments and undertakings); (iii) Funds accumulated from contributions made by outside agencies to the Union or State Governments (examples are autonomous bodies like ICAR etc.) Where reserves are created (either part or in full) out of money set aside by the Government from the Consolidated Fund of India, the transfers to and the expenditure from the reserves are required to be voted by the Parliament. This procedure may not apply to certain Reserve Funds which are governed by special arrangements. Reserve Funds are classified into two categories according to requirement of interest payment. They are (a) Reserve Funds bearing interest and (b) Reserve Funds not bearing interest. Reserve Funds bearing interest The major components of reserve funds bearing interest are pertaining to Railway, Government Commercial Departments and Undertakings. The total outstanding liabilities under this component have shown substantial ....

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....reduction due to draw down from Railways. While the outstanding amount under this category was 15,627 crore at the end of March 2009, the net outstanding is 474 crore at the end of March 2011. Reserve funds related to railways namely, Railway Depreciation Reserve, Railway Development Fund and Railway Capital Fund are showing negative balance amounting to 2,899 crore at the end of March 2011, which needs to be reversed by recouping the additional draw-down from past by transferring necessary funds from current revenue. The trends of outstanding liabilities in this category are shown in Table 3.3 below. 19 Government Debt: Status Paper Table 3.3: Reserve Funds – Bearing Interest (in crore) 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Reserve Funds-Bearing interest 12749 16602 Percentage of GDP 0.3 22348 15627 4848 474 0.4 0.4 0.3 0.1 0.0 འ Reserve Funds not bearing interest Total outstanding liabilities at the end of March 2011 under this category has increased to 21,143 crore from 15,822 crore at the end of March 2010. This increase is mainly on account of higher transfer made under the Farmers Debt Table 3.4: Major Components....

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.... of Non-interest Bearing Reserve Funds Waiver and Debt Relief Scheme to Farmers Debt Relief Fund 2³ to take care of committed expenditure in 2011-12. Some of the other major components with their outstanding liabilities at the end of March 2011 are shown in Table 3.4 below: Sr. No. Major Components (in crore) Outstanding Liabilities 1. Central Road Fund 2. Railway Safety Fund²4 3. 4. Guarantee Redemption Fund National Calamity Contingency Fund (as on 31.3.2011) 3,803 3,076 1,630 1,485 The trends in liabilities under this component in the recent years are shown below. - Table 3.5: Reserve Funds – Not Bearing Interest (in crore) 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Reserve Funds- Not Bearing interest 10094 Percentage of GDP 0.3 17850 0.4 22497 0.5 18621 0.3 15822 0.2 21143 0.3 III. Deposits and Advances In the Public Account certain sums of money are received to be held as deposits with Government. This flow of money as deposit comes by virtue of certain statutory provision or general or special orders of Government. Some of these deposits are interest bearing. The total outstanding liabilities under Deposits ....

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.... bearing interest at the end of March 2011 has increased to 69,948 crore from 68,027 crore at the end of March 2010. This amounts to 0.9 per cent of GDP. Of this, 51,315 crore is on account of Employees Family Pension Scheme, 1971; ` 6,723 crore is under Field Deposits; 5,847 crore is under Miscellaneous Deposits and 2,947 crore is under Coal Mines Family Pension and Insurance linked scheme. These components account for 95.5 per cent for interest bearing deposits presently. The total outstanding liabilities under Deposits not bearing interest at the end of March 2011 has increased to 37,197 crore from 30,757 crore at the end of March 2010. This amounts to 0.5 per cent of GDP. These deposit accounts largely consist of Civil Deposits like Security Deposits, Civil Court Deposits, Public Works Deposits, Deposits for purchase abroad, Defence Deposits, Railway Deposits, Postal Deposit, Telecommunication Deposits and balance account of Union Territories. The trends in outstanding liabilities for Deposits are shown in Table 3.6 below. 23 Balance under this Fund was 4,660 crore at the end of March 2011 24 Including Special Railway Safety Fund 20 Public Account Li....

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....abilities Table 3.6: Deposits – Interest Bearing and Not Bearing Interest (`in crore) 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Deposits 86619 96844 81941 94435 98783 107145 Percentage of GDP 2.3 2.3 1.6 1.7 1.5 1.4 Bearing interest 40901 46104 50715 62757 68027 69948 Percentage of GDP 1.1 1.1 1.0 1.1 1.1 0.9 45717 1.2 50741 1.2 31226 0.6 31677 0.6 30757 0.5 37197 0.5 Not bearing interest Percentage of GDP Advances Government occasionally makes loans and advances to public and quasi-public bodies and to individuals, some under special laws and others for special reasons or as a matter of recognized policy. The monitoring of the conditions of repayment of a loan or advance is done and a close watch over repayment of principal and realization Table 3.7:Advances of interest, if any, is maintained. Under advances in the Public Account, for the period ending 31st March 2011 there is a balance of (-) `5,899 crore which is mainly attributed to Postal advance of (-) 4,794 crore and Telecommunication advance of (-) 323.28 crore. The trends in outstanding advances in the Public Account are shown in Table 3.7 below.....

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.... Advances Percentage of GDP (in crore) 2005-06 2006-07 2007-08 -3302 -3342 -4467 -0.1 -0.1 -0.1 2008-09 2009-10 -9817 -8969 -0.2 -0.1 2010-11 -5899 -0.1 IV. Suspense and Miscellaneous Under Suspense heads in the Public Account, all such transactions are recorded which are ultimately removed either by payment or recovery in cash or by book adjustments. Unless otherwise provided for by rules, the uses of Suspense heads for provisional adjustment of transactions are to be avoided. The unadjusted balances under these heads continue to represent bonafide assets or liabilities of Government capable of being realized or settled, as the case may be. All balances in suspense heads must be reviewed at short intervals and in reviewing the balances it should be ensured that no item remains unadjusted longer than is reasonably necessary to bring about its clearance in the ordinary course with due regard to the rules applicable to each case, as prescribed by the Controller General of Accounts in consultation with the C&AG. However, there are instances of amounts remaining unadjusted at the end of the year thereby leading to under reporting of deficit of th....

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....e Government to some extent. The outstanding under various suspense and miscellaneous heads administered by various Ministries/Departments at the end of March 2011 has reduced to (-)` 15,920 crore from (-)` 25,014 crore at end of March 2010. Necessary steps have to be taken to reduce this amount in the coming years. V. Remittances In the case of Remittance transactions, debits and credits are cleared either by receipt or payment in cash or by book adjustment under the relevant Service or Revenue heads of accounts, or are paired off by corresponding credits or debits within the same or in another accounting circle. As per extant guidlines, the scrutiny of balances from month to month should be done in such a manner to effect their early clearance. Accuracy of the outstanding at the end of the year should be maintained effectively. Necessary efforts are being made in this regard. The outstanding under various Remittances components at the end of March 2011 has reduced to (-)`2,232 crore from (-) 2,574 crore at end of March 2010. 21 Government Debt: Status Paper VI. Cash Balance This shows the cash balance of the Government of India with RBI, CAS, Nagpur. ....

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....This is depicted as debit if the Government has surplus cash at the end of the reporting period because such surplus cash is invested by RBI on behalf of the Government upto 50,000 crore. Surplus exceeding 50,000 crore are held as cash balance in Government Account with RBI. Table 3.8: Public Account ༣ Summary All the components of Public Account of the Government of India have been explained above. Of the total liabilities considered here (excluding NSSF liabilities in the Public Account), interest bearing liabilities amount to 5,39,662 crore at the end of March 2011 which is 7 per cent of GDP and 15.2 per cent of total debt and liabilities of the Central Government. The trends in various components as percentage of GDP are summarised below in Table 3.8: (Percentage of GDP 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Public Account Liabilities 25 (a) State Provident Fund 1.8 1.7 1.5 1.5 1.5 1.5 (b) Other Account 5.1 5.1 4.9 5.9 5.1 4.0 (c) Reserve funds & Deposit 3.0 3.1 2.5 2.3 1.8 1.7 Bearing Interest 1.5 1.5 1.5 1.4 1.1 0.9 Not bearing interest 1.5 1.6 1.1 0.9 0.7 0.8 Total 9.8 9.8 9.0 9.7 8.5 7.1 It m....

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....ay be seen from the above table that public account liabilities have shown consistent decline during 2005-06 to 2010-11, except for the year 2008-09 wherein large issuance of securities were resorted to for payment of petroleum and fertilizer subsidy. During 2010-11 and in 2011-12, part of the bonds issued in lieu of fertilizer subsidy was bought back by the government. The positive trend on declining public account liabilities have been restored in 2009-10 and 2010-11. With the change in policy on subsidy payment in the form of cash only, the overall liabilities in public account as percentage of GDP is expected to show consistent decline over the medium term. 25 Excluding liabilities on account of NSSF liabilities not used for financing of Central Govt. deficit 22 ༡༡ 4 Trends in Central Government Debt and Liabilities In the preceding sections various components of Central Government debt and liabilities have been explained. The detailed information was first time provided in the last year's debt paper. Continuing with the analysis as done in the previous year's paper, the table below gives the data on public debt as presented in the Receipts ....

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....Budget 2011-12 and in the following sections further analysis of trends in public debt and liabilities has been made. Table 4.1: Debt Position of the Central Governement PUBLIC DEBT (crore) Actuals Provisional Estimates RE 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2010-11 BE 2011-12 1. Total Debt (2+5) Percentage of GDP 2260145 61.2 2538596 59.1 2837426 56.9 3159178 56.1 3529960 3938774 3931105 4352689 54.7 51.3 49.9 48.5 2. Public Debt26 (3+4) Percentage of GDP 1484001 1647691 40.2 38.4 1911682 38.3 2142887 38.1 2462422 38.1 2824754 36.8 2860191 36.3 3281465 36.5 3. Internal Debt 1389758 Percentage of GDP 37.6 1544975 36.0 1799651 36.1 2019841 35.9 2328339 36.1 2667115 34.8 2703844 34.3 3110618 34.6 4. External Debt27 Percentage of GDP 94243 2.6 102716 2.4 112031 2.2 123046 2.2 134083 2.1 157639 2.1 156347 2.0 170847 1.9 5. Other Liabilities 28 (Public Account) Percentage of GDP 776144 21.0 890905 20.7 925744 18.6 1016291 18.1 1067538 16.5 1114020 14.5 1070914 13.6 1071224 11.9 6. GDP29 3693369 4294706 4987090 5630063 6457352 7674148 7877947 8980860 The table above sh....

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....ows the overall debt and liabilities for the financial year ending March 2011 at` 39,38,774 crore amounting to 51.3 per cent of GDP. This includes 28,25,754 crore of Public Debt (including both internal and external debt at book value) amounting to 36.8 per cent of GDP and 11,14,020 crore of Other Liabilities in the Public Account of the Government of India amounting to 14.5 per cent of GDP. 26 debt in the Consolidated Fund of India 27 External debt at book value at historical exchange rates 28 Liabilities in the Public Account of Central Government Certain components of public debt and liabilities, namely external debt, MSS, NSSF (liabilities in Public Account) and 14-days Treasury Bills require necessary adjustment for correctly depicting the position of debt. In the following sections each of these components has been analyzed separately and the adjusted debt with the corrections has been explained. 29 CSO data for QE2010-11 and AE2011-12; BE2011-12 as presented in the Budget for 2011-12. 23 Government Debt: Status Paper Impact of External Debt calculation at been arrived at by adopting exchange rate prevailing Current Exchange Rate The above data for pu....

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....blic debt as presented in the Receipts Budget includes external debt at book value. However, for correct depiction of liabilities, the historic value of external debt contracted over the years has to be updated with its current value in rupee term. The correction in external debt data has at the end of respective financial years for conversion of outstanding loans denominated in foreign currencies to rupees for each year. For 2010-11, exchange rate of 44.70 for a US dollar (as on 31st March 2011) has been taken. The following table gives the details of the impact of this correction on the overall debt and public liabilities. Table 4.2: Trends in Central Government Debt and Liabilities with external debt at current exchange rate 1. Total Debt percentage of GDP Of this 2. External Debt (at Book Value) percentage of GDP (crore) Actuals Provisional Estimates RE 2005-06 2006-07 2007-08 2260145 2538596 61.2 59.1 2837426 56.9 2008-09 2009-10 3159178 3529960 56.1 54.7 2010-11 3938774 2010-11 51.3 3931105 49.9 BE 2011-12 4352689 48.5 94243 2.6 102716 2.4 112031 2.2 123046 2.2 134083 2.1 157639 2.1 156347 2.0 170847 1.9 3. Extern....

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....al Debt (at current Value) percentage of GDP 194070 5.3 201199 4.7 210086 4.2 264062 4.7 249306 3.9 278877 3.6 271570 3.4 293377 3.3 4. Total Debt with external debt at current exchange rate (1-2+3) percentage of GDP 2359972 63.9 2637079 61.4 2935481 58.9 3300194 58.6 3645183 56.5 4060012 52.9 4046328 51.4 4475219 49.8 During the period 2005-06 to 2010-11, the adjusted debt and liabilities show a reduction from 63.9 per cent to 52.9 per cent. While the correction with external debt at book value during the above mentioned period is of the order of 9.9 per cent of GDP (61.2 per cent in 2005-06 minus 51.3 per cent in 2010-11), the same with external debt at current value is 11 per cent of GDP (63.9 per cent in 2005-06 minus 52.9 per cent in 2010-11). NSSF liabilities not used for financing Central Government deficit This component of liability is reflected in the Public Account of the Central Government. All deposits under small savings schemes are credited to the "National Small Savings Fund" (NSSF), established in the Public Account of India with effect from 1.4.1999. All withdrawals by the depositors are made out of the accu....

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....mulations in 30 For changes in investment guidelines refer Box 2.2. 24 this Fund. The balance in the Fund is invested in special Central and State Government securities as per norms decided from time to time by the Central Government³º. The liability of outstanding balances amounting to ` 1,76,221 crore under various small savings schemes at the close of 31st March, 1999 was borne by the Central Government by treating the same as investment of NSSF in special Central Government securities. This liability has been accounted for as internal debt in the public debt. Sums received in NSSF on redemption of special securities from States as well as Centre are being reinvested in special Central Government securities. These securities also constitute a part of the internal debt of the Government of India under the consolidated fund. At the end of 2010-11, the outstanding liabilities in the form Trends in Central Government Debt and Liabilities of Central government special securities issued towards NSSF liability is `2,18,485 crore (against 2,25,033 crore estimated in RE 2010-11) amounting to 2.8 per cent of GDP and 6.2 per cent of total debt and liabilitie....

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....s of Central Government. In the overall debt and liability of the Central Government, as shown in Table 1.1 of this paper, apart from the above 2,18,485 crore of liability, further `5,68,614 crore has also been included as other liability towards NSSF in Public Account. Thus the total liability on account of NSSF comes to 7,87,099 crore as shown in Table 1.1. This liability is also shown as part of overall debt and liabilities in Table 4.1 and 4.2 of this chapter. `5,68,614 crore (shown as public account liability of Central Government towards NSSF) needs to be seen in the right perspective as this liability has not exactly been used for financing deficit of the Central Government. Out of the balance amount of 5,68,614 crore shown above, 5,27,563 crore is matched with assets in the form of State Governments' Special Securities 31 issued towards NSSF which the States have used for financing their deficit. This part of the liability (5,27,563 crore amounting to 6.9 per cent of GDP) has been shown as State Governments' liability and therefore, while calculating the overall debt and liabilities of the Central Government as well as general government, it needs ....

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....to be netted out to correctly depict the overall debt. The following table shows the impact of this adjustment over the already adjusted debt on account of factoring in external debt at current exchange rate. There is no ambiguity in considering 2,18,485 crore (for which Central Government Special Securities have been issued to NSSF) as part of the overall debt and liability of the Central Government. However, the balance amount of Table 4.3: Trends in Central Government Debt and Liabilities-with NSSF adjustment (crore) Actuals Provisional Estimates RE BE 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2010-11 2011-12 1. Total Debt with external debt at current exchange rate 2359972 2637079 2935481 3300194 3645183 4060012 4046328 4467912 percentage of GDP Of this 63.9 61.4 58.9 58.6 56.5 52.9 51.4 49.7 2. Liabilities on account of NSSF not used for financing Central Govt. deficit percentage of GDP 391302 452064 458892 460056 484262 527563 481389 481483 10.6 10.5 9.2 8.2 7.5 6.9 6.1 5.4 3. Total Debt net of 1968670 2185016 2476589 2840138 3160921 3532449 3564939 3986429 53.3 50.9 49.7 50.4 49.0 46.0 45.3 44.4 liabilitie....

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....s towards NSSF not used for financing Central Govt. deficit (1-2) percentage of GDP During the period 2005-06 to 2007-08, the process of fiscal consolidation helped in gradually reducing the debt to GDP ratio from 53.3 per cent to 49.7 per cent. However, during 2008-09 due to the counter cyclical measures taken by the 31 This includes 1,500 crore investment in IIFCL Government, the fiscal deficit went up and accordingly the debt to GDP ratio increased to 50.4 per cent in 2008-09. Though the policy of fiscal expansion continued during 2009-10, still there was a decline in debt to GDP ratio from 2008-09. 25 Government Debt: Status Paper With the process of fiscal consolidation resuming in 2010-11, wherein fiscal deficit was substantially reduced to 4.8 per cent of GDP from 7.8 per cent in 2008-09 and 6.6 per cent in 2009-10 (including the impact of bonds in lieu of subsidies), total debt and liabilities of the Central Government reduced significantly from 49 per cent of GDP in 2009-10 to 46 per cent of GDP in 2010-11. duly factored in the fiscal deficit of the government. The outstanding liabilities under MSS went up to 3.4 per cent of GDP in 2007-08. This....

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...., in turn, has increased the reported debt of the Central Government to that extent and negated the impact of fiscal consolidation which actually aided in reducing the debt to GDP ratio for the period 2004-05 to 2007-08. Accumulation of debt under MSS is primarily a function of the extent of sterilisation required by the monetary authority in meeting its monetary policy objectives. There is only limited correlation in the fiscal side in the form of interest obligation on the above mentioned debt. While evolving a path of fiscal consolidation for the future years, this component of debt is difficult to predict in medium term. At the same time, cash raised under this scheme is not used for financing 32 the deficit of the Central Government. In view of the above, while reporting the general government debt and liabilities, this component has to be dealt with separately. Market Stabilisation Scheme (MSS) Marginal increase in debt to GDP ratio from 49.7 per cent in 2007-08 to 50.4 per cent in 2008- 09 and then the improvement in 2009-10 as shown in Table 4.3 don't reflect the true impact of fiscal expansion during 2008-09 and 2009-10. Similarly, the extent of co....

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....rrection in debt to GDP ratio during the fiscal consolidation period of 2004-05 to 2007-08 is understated which needs to be explained by analysing the impact of MSS during this period. MSS was started in 2004-05 to assist the Reserve Bank of India for sterilisation of its exchange market intervention by absorbing excess liquidity from the system arising on account of large inflow of foreign exchange. This scheme provided for borrowings in addition to the normal borrowings of the Centre to finance its deficit. However, the proceeds so realised from these borrowings are sequestered in a separate cash account with RBI and are not used for purpose other than redemption of dated securities or treasury bills raised under this scheme. Interest payments on these borrowings are met by the Government and are Table 4.4: Trends in Central Government Debt and Liabilities After adjusting for the debt under MSS, the correction in debt to GDP ratio for the period ending 2007-08 truly reflects the impact of fiscal consolidation. Also, the deterioration in debt to GDP ratio during 2008-09 and 2009-10 is much more pronounced and truly reflects the impact of increase in fiscal d....

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....eficit. This could be seen from the table below wherein debt has been shown after adjusting for the impact of MSS: Total Debt net of liabilities towards NSSF crore) Actuals Provisional Estimates 2005-06 2006-07 2007-08 2008-09 2009-10 RE BE 2010-11 2010-11 2011-12 not used for financing Central Govt. deficit percentage of GDP 1968670 2185016 2476589 2840138 3160921 3532449 3564939 3986429 53.3 50.9 49.7 50.4 49.0 46.0 45.3 44.4 Of this MSS 29062 62974 170554 88773 2737 0 0 20000 percentage of GDP 0.8 1.5 3.4 1.6 0.0 0.0 0.0 0.2 Total Debt net of liabilities under MSS and towards NSSF not used for financing Central Govt. deficit 1939608 2122042 2306035 2751366 3158184 percentage of GDP 52.5 3532449 3564939 3966429 49.4 46.2 48.9 48.9 46.0 45.3 44.2 32 If a decision on de-sequestering of certain amount takes place and cash is transferred from the MSS cash account to normal cash account of the Government, an equivalent amount of securities issued under MSS would form part of the normal debt of the government. 26 Trends in Central Government Debt and Liabilities The debt as percentage of GDP (after adjusting for MSS ....

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....and NSSF liabilities) has improved from 52.5 per cent in 2005-06 to 46.2 per cent in 2007-08. This shows improvement of 6.3 per cent of GDP during the above mentioned period of fiscal consolidation. Without netting of the impact of MSS, the reduction in debt over GDP during this period is 3.6 per cent only. Similarly, the increase in debt to GDP ratio which was 2.7 per cent of GDP (48.9 minus 46.2) is understated without netting of the impact of MSS during 2008-09 and shown as increase of 0.7 per cent of GDP (50.4 minus 49.7). During the period 2004-05 to 2007-08, the accretions under MSS liabilities were quite significant. This led to over projection of existing debt for the Central Government during the above mentioned period. This component partially negated the improvement in the level of debt achieved due to fiscal consolidation. During 2008-09 and 2009-10 the liabilities under MSS got liquidated and accretion under NSSF also slowed down. This resulted in lower contribution of these two components in the overall debt as reported in the budget document. Therefore it may be seen from the chart below that the last trend in the chart i.e. debt net of NSSF ....

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.... and MSS liabilities not used for financing Central Government deficit and with external debt at current exchange rate, gives the real depiction of movement in debt level along with the variation in fiscal policy of the Government. Debt as percentage of GDP has started going up after 2007-08 due to the larger fiscal deficit. With the reduction in fiscal deficit in 2010-11, it is once again showing a reducing trend. Chart 4.1 Trends in Central Government Debt and Liabilities Percent of GDP 70.0 65.0 60.0 55.0 50.0 45.0 40.0 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 (prov.) (BE) - Debt as reported in Budget 2011-12 Debt with external debt at current exchange rate Debt with external debt at current exchange rate and net of NSSF liabilities not used for financing central govt. deficit Debt with external debt at current exchange rate and net of NSSF and MSS liabilities not used for financing central govt. deficit Trends in Consolidated General the consolidated data for all the State Governments as published in the RBI publication –‘Study of State Government Debt For the purpose of arriving at Consolidated Finances' for 2010-11 ....

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....has been used in this paper. General Government debt, Centre's debt has been taken as derived in Table 4.4 after adjusting for external debt at current exchange rate, NSSF and MSS liabilities not used for financing the deficit of Central Government. For the purpose of absolute value of outstanding debt for State Governments, One of the components of Centre's debt in the form of investment in 14-days Treasury Bills by the States has to be adjusted along with outstanding Centre's loans to States for arriving at the consolidated general government debt. These two adjustments are needed to avoid double counting 27 Government Debt: Status Paper of debt by eliminating inter-governmental transaction. While adjustment for the second component is as per the established principle, treatment of the first component which is in the form of lending from States to Centre has to be seen in the same context. State Governments are running deficit budget and at the same time investing their cash surplus on consistent basis in debt instrument (14-days Treasury Bills) of the Central Government. In a hypothetical situation, if the State Governments reduce their borrowings in a ....

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....particular year to such extent so as to bring down their level of investment in 14-days Treasury Bills to zero or a lesser amount, the debt reported for State Governments would be reduced to that extent without any under financing of deficit. At the same time, there will be reduction in financing side of the Central Government's deficit which would trigger fresh borrowings from other sources to the same extent by the Central Government. Thus, the level of debt for Central Government would remain the same as one instrument of debt will be replaced by another instrument. But the level of debt for the State Governments in this hypothetical situation would be reduced by the extent of cash draw down from investment in 14-days Treasury Bills. This component of debt is being counted both at the Centre and State level when their debt is reported separately. While presenting the consolidated debt for Centre and States, this has to be therefore corrected and State Government's debt needs to be netted to the extent of their investment in 14-days Treasury Bills instrument. With the above adjustments, trends in general government debt are shown in the table below: Table....

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.... 4.5: Trends in Central Government, State Govt. and General Govt. Debt and Liabilities (crore) Actuals Provisional Estimates 2005-06 2006-07 2007-08 2008-09 2009-10 1. Central Government 1939608 2122042 2306035 2751366 3158184 3532449 3564939 RE BE 2010-11 2010-11 2011-12 3966429 percentage of GDP 52.5 49.4 46.2 48.9 48.9 46.0 45.3 44.2 2. States' Debt and Liabilities 11,47,717 12,41,576 13,28,302 14,70,195 16,38,474 18,20,155 1820155 2035696 percentage of GDP Of this, 31.1 28.9 26.6 26.1 25.4 23.7 23.1 22.7 2(a) Investment in 14-days Treasury Bills percentage of GDP 39340 39475 68630 98663 95668 101301 88984 88984 1.1 0.9 1.4 1.8 1.5 1.3 1.1 1.0 3. State Debt and Liabilities(net) {2-2(a)} 1108377 1202101 1259672 1371532 1542806 1718854 1731171 1946712 percentage of GDP 30.0 28.0 25.3 24.4 23.9 22.4 22.0 21.7 4. Outstanding Central Govt. Loans to States 1,57,004 1,46,653 1,45,098 1,43,870 143152.2 1,55,698 1,55,698 1,55,699 percentage of GDP 4.3 3.4 2.9 2.6 2.2 2.0 2.0 1.7 5. General Govt. Debt (1+3-4) 2890981 3177489 3420610 3979028 4557838 5095605 5140412 5757442 percentage of GDP 78.3 74.0 ....

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.... 68.6 70.7 70.6 66.4 65.3 64.1 28 Trends in Central Government Debt and Liabilities measures. General government debt has consistently partially insulated from the fiscal impact of those declined during the period 2005-06 to 2007-08. The reduction is of the order of 9.7 per cent of GDP in two financial years. However, it slipped back by 2 per cent of GDP at the end of 2009-10 due to the stimulus measures undertaken by the government during 2008-09 and 2009-10. With the resumption of fiscal consolidation process coupled with higher economic growth in 2010-11, general government debt has reduced to 66.4 per cent of GDP. During the global financial crisis period, though debt of Central Government has increased from 46.2 per cent of GDP to 48.9 per cent of GDP, States were able to reduce their net debt from 25.3 per cent of GDP to 23.9 per cent of GDP. This shows that much of fiscal expansionary measures were undertaken at the central level and States were 13th FC Recommended Debt Roadmap for General Government It may be recalled that the 13th Finance Commission has recommended reduction of the consolidated debt of the Central and State Governments to 68 p....

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....er cent of GDP by the end of year 2014-15. However, the target for general government debt in terminal year has been achieved in the first year of the award period itself. This better than recommended performance on debt stock is on account of lower than estimated deficit³3 during 2010-11 and higher than estimated nominal GDP number when compared to what was factored in at the time of Finance Commission report presentation. The breakup of recommended debt targets for Centre, States and General Government by the 13th Finance Commission is given below: (Percentage of GDP) 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 1. Debt Stock-Centre 54.2 53.9 52.5 50.5 47.5 44.8 2. Debt Stock-States 27.1 26.6 26.1 25.5 24.8 24.3 3. Outstanding Central Loans to States 2.5 2.2 2.0 1.7 1.5 1.3 78.8 78.3 76.6 74.3 70.8 67.8 4. Consolidated Debt (1+2-3) Conclusion It may be seen from above analysis that after adjusting for (a) external debt at current exchange rate, (b) NSSF liabilities not used for financing Central Government deficit and (c) debt under MSS; the overall debt and liabilities of the Central Government as percentage of GDP is 46.0....

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.... per cent of GDP at the end of March 2011. Without adjusting for these three components, the reported debt of the Central Government at the end of Mach 2011 would be 51.3 per cent of GDP. There was a consistent trend of reduction in debt to GDP ratio for the Central Government upto 2007-08. This reduction was primarily on account of fiscal consolidation path followed during the above mentioned period. The correction of the order of 6.3 per cent³4 of GDP in two financial years shows that by consistently maintaining fiscal deficit at a prudent level over the medium term, 33 the overall debt as percentage of GDP could be curtailed to a more sustainable level. However, higher fiscal deficit (during 2008-09 and 2009-10) due to counter cyclical measures, has reduced the gain by 2.7 per cent³5 of GDP. Resumption of fiscal consolidation process in tandem with higher economic growth has caused a substantive reduction in debt as percentage of GDP for the period ending March 2011. In one year, the correction ³ is of the order of 2.9 per cent of GDP. This brings in the issue of consistency in conducting fiscal policy over the medium term. The principles of 'c....

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....ounter cyclical policy' adopted during the difficult years needs to be followed by fiscal consolidation and creation of fiscal space in the better years. This would help in recapturing the gains lost during bad years and would provide fiscal space for implementing counter-cyclical policy during the bad years. 13th FC recommended fiscal deficit for Central Government was 5.7 per cent of GDP whereas it has turned out to be 4.8 per cent of GDP. 34 From 52.5 per cent in 2005-06 to 46.2 per cent in 2007-08 35 From 46.2 per cent in 2007-08 to 48.9 per cent in 2009-10 36 From 48.9 per cent in 2009-10 to 46.0 per cent in 2010-11 29 5 Sustainability of Outstanding Government Debt and Future Financing Scenario in India Sustainability of sovereign debt has always been an important tool to assess the macro- economic health of a Country. This topic has become all the more relevant in the present context of happenings around the globe, particularly in the Euro zone. Most of the economies of the world have undertaken fiscal expansionary measures starting from 2008 to reduce the impact of the global financial crisis. These measures in turn have led to significant increa....

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....se in the level of public debt and liabilities as percentage of GDP for most of the countries. While the shift in policy had helped global economy to move towards recovery, the future outlook for the global economic growth is still not the same as it was before the advent of the financial crisis in 2008. The year 2011 has further added to this uncertainty on future revival. This has made the debate on sustainable level of public debt all the more relevant and this issue has become central for designing future fiscal policy. After giving a detailed analysis of existing debt stock of India in the previous chapters, it would be pertinent to look at issues related to sustainability of this stock as well as likely scenarios of financing future debt in India. Though the level of Debt as percentage of GDP in case of India has not increased steeply during the crisis period (2008-09 and 2009-10), the trend of reduction witnessed during the fiscal consolidation period just before the crisis did however get reversed. Central Government debt as percentage of GDP increased from 46.2 per cent in 2007-08 to 48.9 per cent of GDP at the end of 2009-10. Similarly, the consol....

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....idated debt of general government increased from 68.6 per cent in 2007-08 to 70.6 per cent in 2009-10. However, government was able to finance larger deficit without any disruption in market mainly through domestic financing. With the reduction in fiscal deficit for 2010-11, the trend witnessed in the last two years of increasing debt has been arrested and general government debt and Central Government debt has reduced to 66.4 per cent and 46 per cent of GDP respectively. It would be the endeavour of the government to gradually reduce the debt level over the medium term even below the level recommended³7 by the 13th Finance Commission. Recent experience has shown that any analysis of sovereign debt sustainability should not be merely based on the classical definition³8. It should encompass some of the important parameters such as maturity profile, composition, carrying cost, external or domestic investor base along with savings rate, potential and realised tax to GDP ratio, etc. In the case of India, the gradually declining level of general government debt estimated over the medium term does answer the sustainability issue positively. At the same time....

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.... the characteristics of existing debt stock and economic parameters such as high domestic savings rate, longer residual maturity, fixed rate of interest, higher proportion of domestic currency denominated debt and wide gap in potential and realised tax to GDP ratio, put India in a better position when compared to equally or even lower level of indebted economies. The following analysis of the above mentioned characteristics would show that India has positive attributes compared to both Developed and Emerging Market economies and is less vulnerable to risky parameters seen either in developed and other EMES. 37 67.8 per cent and 44.8 per cent of GDP for General Government and Central Government respectively by the end of 2014-15 38 Principles related to Primary deficit along with differential in interest and growth rate 30 Sustainability of Outstanding Government Debt and Future Financing Scenario in India Maturity profile of Central Government period 2006-07 to 2010-11. Dated Securities The weighted average maturity for outstanding stock at the end of March 2011 of Central Government dated securities is 9.64 years. Weighted average maturity of dated securiti....

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....es issued during 2011-12(upto December 2011) is 12.56 years. This would help in further elongating maturity profile of the government debt which in turn would help in reducing redemption pressure in the coming years. The trends in the maturity profile of the stock and flow in the recent years for the Central Government dated securities are shown below: Maturity profile of the Central Government dated securities shows that in the next five years only 29 per cent of outstanding stock at the end of March 2011 would be required to be refinanced. Thus on average about 6 per cent of the outstanding stock needs to be rolled over every year in the coming 5 years. This would translate into average roll over volume of about 1.2 per cent of GDP which compares well with the average total revenue receipts of 9.9 per cent of GDP for the Central Government during the Table 5.1: Weighted average maturity of dated securities Issued During the year Year 1 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 Outstanding Stock Weighted Average Maturity (yrs) 2 3 14.94 9.78 14.13 9.63 16.9 9.92 14.72 9.97 14.9 10.59 13.81 10.45 11.16 9.67 11.....

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....62 9.64 9.66 2011-12 (upto December, 2011) The above maturity profile may be seen in the context of lower maturity profile of Central Government debt in local currency for most of the Advanced Economies 39 as in 2010. Share of External Debt While general government debt for India stands at 66.4 per cent of GDP at the end of March 2011, external debt for the Government at current exchange rate is 3.6 per cent of GDP. This amounts to 5.4 per cent of total debt. Most of the external debt is from multilateral and bilateral creditors. Exposure towards Foreign institutional investment in Government debt in India is also at a very low level and that too in domestic currency. This mitigates the refinancing risks with respect to foreign exchange requirement, if any. In most of the emerging market economies, external debt constitutes fairly large proportion of overall debt 12.56 when compared to India. This gives India a distinct advantage in refinancing its maturing debt. Fixed or variable Interest Rate Floating rate bonds constitute less than 3 per cent of outstanding Central Government dated securities. That implies that the future risk on inflation movement i....

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....s not high for India for the existing stock. Domestic Savings Rate During the 1980s and 90s, Domestic Savings rate in India as percentage of GDP was hovering in 20s till it crossed the 30 per cent barrier for the first time in 2003-04. Thereafter it increased steadily to 36.4 per cent of GDP in 2007-08 and continues to be in 30s even during the crisis period (32.5 per cent of GDP in 2008-09). The high rate 39 Source: OECD Central Government Debt Yearbook (1980-2010) 31 Government Debt : Status Paper of domestic savings as proportion of GDP has worked as a growth propeller for the Indian economy. This further gives India an edge over the developed economies with potential for higher investment rate in coming years, thereby aiding in future growth of economy. The increase in GDP at higher rate is expected to further contribute to the revenue mobilization of the Government and in turn improve the debt service ratio. All the above characteristics gives a distinct comfort level for future debt servicing for India. However, being a country with huge financing need for social and physical infrastructural requirement, it would not be prudent to further increase t....

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....he share of expenditure on interest payments in the overall expenditure as this would result in lower resources availability for financing the developmental needs. The trends in interest payment as a percentage of net tax revenue of the Central Government in the recent years are given below: Table 5.2: Interest payment as percentage of net tax revenue Interest Payment % of Net Tax Revenue 126934 56.5 2004-05 2005-06 132630 49.3 2006-07 2007-08 2008-09 2009-10 2010-11 150272 171030 192204 219500 248664 42.8 38.9 43.4 46.7 41.1 It may be seen from the above table that 56.5 per cent of net tax revenue to the Central Government was being used for meeting interest payment commitments of past debt during the year 2004-05. However, with the process of fiscal consolidation during 2004-05 to 2007-08, this percentage came down to about 38.9 per cent. This correction helped in deployment of more resources for developmental needs. However, with expansionary fiscal policy undertaken in 2008-09 and 2009-10, share of interest payment from the net tax revenue has again increased to 46.7 per cent in 2009-10. This clearly indicates that the level of incremental debt....

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.... which was acquired during 2008-09 and 2009-10 has contributed to cornering higher level of available tax resources. Though with reduced level of deficit in 2010-11, this percentage has come down to 41.1 per cent in 2010-11, still this is higher than pre crisis level. This level of increase in interest payment may not be sustainable in the long term. Government is committed to bringing down this ratio in coming years to unlock more resources from current revenue for taking up developmental work.. Even though there is minimal risk for India at this stage for its refinancing needs of existing debt, the government is taking efforts to further reduce the debt as percentage of GDP and interest payment as percentage of net tax revenue to adhere to the objective of inter-generational equity in fiscal management over the long term. 32 Box 5.1- Initiatives for reduction of debt Utilisation of one off resources to contain debt During 2010-11, government's revenue witnessed a windfall gain in the form of auction proceeds from 3G and BWA spectrum. In the Budget 2010-11, receipts from these auctions were estimated at 35,000 crore. However, the actual receipts were h....

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....igher at 1.06 lakh crore. Thus, an additional sum of 71,000 crore was received. Keeping this in view, Government in its endeavour to reduce debt to the extent possible, took certain decisions which are outlined below: (a) Market borrowings through dated securities were reduced by 20,000 crore from the Budget Estimate level (i.e. from ` 3.45 lakh crore to 3.25 lakh crore); (b) Bonds issued to Fertilizer companies in lieu of Fertilizer subsidy amounting to 11,795 crore were bought back in two tranches on 31st March 2011 and 26th July 2011; (c) NSSF liabilities in public account were reduced to the extent of 9,000 crore through redemption of Special Central Government Securities. Similarly, borrowing from NSSF was reduced by 2,023 crore compared to Budget Estimates. Thus, total reduction in debt/borrowing from NSSF was reduced by 11,023 crore. འ Sustainability of Outstanding Government Debt and Future Financing Scenario in India (d) Loans to the extent of US $ 3.2 billion were estimated in BE 2010-11 from IBRD for recapitalisation of Public Sector Banks. However, loans to the extent of US $ 1.2 billion amounting to about 5,400 crore (as per the excha....

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....nge rate at that time) were not availed in view of available resources. The above items accounted for avoidance/ reduction of debt by 48,218 crore. This reduction in debt works out to 68 per cent of the receipts in excess of estimates from the auction of 3G and BWA spectrum. Future Debt Financing Scenario While the current debt stock does not pose great risk of roll over, it would be relevant to further analyse the future financing scenario of the Central Government's deficit. In this part of the paper, an analysis of Central Government's ability to finance its fiscal deficit has been done keeping in view the existing regulatory framework regarding investment patterns of scheduled commercial banks with respect to dated securities. Scheduled commercial banks (SCBs) are the largest investors in the Central Government's dated securities. One of the primary reasons for this is that SCBs are required to conform to the Statutory Liquidity Ratio (SLR) requirement as mandated by the RBI. All Scheduled Commercial Banks, in addition to the average daily balance for CRR which they are required to maintain, are also required to maintain in India, a) in cash, or b) in....

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.... gold valued at a price not exceeding the current market price, or c) in unencumbered approved securities valued at a price as specified by the RBI from time to time, an amount of which shall not be less than 24 per cent of their respective total demand and time liabilities. The following assumptions are made for arriving at future financing scenario for the Central Government dated securities over the medium to long term: (a) The average trend growth rate of aggregate deposits of SCB's during the period 2003-04 to 2010-11 is 18.51 per cent40 per annum. It is therefore assumed that the net demand and time liabilities (NDTL) would grow at 17 per cent with base year as 2010-11. (b) It is assumed that mandatory SLR holding would remain at prevailing level of 24 per cent of NDTL. (c) The recent trends show that Commercial Banks including banks acting as Primary Dealers are holding around 47 per cent of outstanding dated securities issued by the Central Government. It is assumed that Banks would continue to hold 47 per cent of incremental issuance of dated securities of Central Government. (d) While the average nominal growth in GDP (at current market prices....

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.... at market price) during last six years i.e. 2005-06 to 2010-11 is 15.5 per cent; for medium term projection, GDP growth is assumed at 14 per cent per annum in nominal terms. (e) It is assumed that of the incremental investment by SCBs in the SLR category, 85 per cent would be in Central Government dated securities and the balance 15 per cent would be in State securities/State Development Loans (SDLs). With these assumptions, the financing scenario of Central Government deficit financing through dated securities over the next 10 years are shown in the table 5.3. It may be seen from the table that in the event of Banks maintaining 24 per cent of their NDTL in SLR, the Central Government would be able to raise net borrowings in the range of 4.3 per cent of GDP to 4.8 per cent of GDP in the coming five years. With SLR requirement maintained at the present level, the scope of financing gradually increases to 5.5 per cent of GDP in 10 years. However, it would be interesting to analyse the impact of changes in mandated SLR requirement, if any, as well as increase in States' share from the overall pool of SLR related papers. 40 Table 47, Scheduled Commercial Bank....

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....s - Select Aggregates, Real-Time Handbook of Statistics on the Indian Economy (HBS), (www.rbi.org.in) 33 Government Debt: Status Paper Table 5.3: Debt financing Scenario Year Incremental NDTL Mandated investment in @17% SLR papers Investment in GoI Securities growth @24% @85% Total financing through dated securities (with GDP with of (3) banks share growth at 14% in nominal terms Total available financing as % of GDP @ 47%) (1) (2) (3) (4) (5) (6) (7) (in crore) 2012-13 1013869 243328 206829 440062 10159884 4.3 2013-14 1186226 284694 241990 514873 11582268 4.4 2014-15 1387885 333092 283129 602401 13203785 4.6 2015-16 1623825 389718 331260 704809 15052315 4.7 2016-17 1899876 455970 387575 824627 17159639 4.8 2017-18 2222854 533485 453462 964813 19561989 4.9 2018-19 2600740 624178 530551 1128832 22300667 5.1 2019-20 3042865 730288 620745 1320733 25422761 5.2 2020-21 3560153 854437 726271 1545258 28981947 5.3 2021-22 4165378 999691 849737 1807951 33039420 5.5 to Even though the floor is set at 24 percent for SLR holdings, the SCBs have, on an average over the period of 2....

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....003-04 to 2010-11, invested about 28 percent of incremental deposits in government securities. Based on the above trend, a more realistic scenario has been arrived at in the table 5.4 with modified assumptions as follows: (a) SLR holdings have been assumed at 27 per cent of incremental NDTL in 2012-13. This has been reduced to 24 per cent in 2013-14, 23 per cent in 2014-15, 22 per cent during 2015-16 Table 5.4: Deficit Financing Scenario II Year 2018-19, 21 per cent during 2019-20 and 2020-21 and furhter to 20 per cent in 2021-22. (b) Progressively the share of States' dated securities would increase as their reliance on market borrowing would increase gradually over the medium term. Therefore, States' share in SLR papers has been increased from 15 per cent to 20 per cent in 2013-14 and further to 25 per cent in 2017-18 and maintained at this level thereafter. Investment Incremental NDTL Mandated investment in @17% SLR papers growth @ 27% to 20% in GoI Securities @85% to 75% of (3) Total financing through dated securities (with banks share GDP with growth at 14% in nominal terms @ 47%) (1) (2) (3) (4) (5) Total available financi....

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....ng as % of GDP (6) (7) (in crore) 2012-13 1013869 273745 232683 495070 10159884 4.9 2013-14 1186226 284694 227755 484586 11582268 4.2 2014-15 1387885 319214 255371 543342 13203785 4.1 2015-16 1623825 357242 285793 608071 15052315 4.0 2016-17 1899876 417973 334378 711443 17159639 4.1 2017-18 2222854 489028 366771 780364 19561989 4.0 2018-19 2600740 572163 429122 913026 22300667 4.1 2019-20 3042865 639002 479251 1019684 25422761 4.0 2020-21 3560153 747632 560724 1193030 28981947 4.1 2021-22 4165378 833076 624807 1329376 33039420 4.0 41 Table 47, Scheduled Commercial Banks - Select Aggregates & Table 123, Ownership of Centre and State Government Securities, Real-Time Handbook of Statistics on the Indian Economy (HBS), www.rbi.org.in 34 Sustainability of Outstanding Government Debt and Future Financing Scenario in India The second scenario shows that Central Government would be able to raise debt of the order of 4.9 per cent of GDP in 2012-13 and in the range of 4.2 per cent to 4.0 per cent of GDP during the remaining period through dated securities. This augurs well as more resources could be released....

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.... from the banking system towards private sector since SLR requirement has been assumed to decline gradually over the next 10 years period. The above two scenarios have not factored in the other sources of deficit financing, namely, external debt, loans from small savings (NSSF) and public account in the form of provident fund, etc. which are available for financing Central Government deficit. The above analysis has been given in this paper to generate discussion among stakeholders on the relevant issue on future debt financing. This, in any manner, should not be construed as government's projection on fiscal or other macro- economic parameters related to economy or monetary policy instruments over medium to long term. It would be interesting to modify some of the above assumptions for further analysis and arrive at future debt financing scenario in Central Government debt. 35 Government Debt: Status Paper Annex -I: Office Memorandum No. 6-1/2011-NS.II (Pt.) Ministry of Finance Department of Economic Affairs (Budget Division) New Delhi, the 11th November, 2011. OFFICE MEMORANDUM Sub: Decisions on the recommendations of the Committee for Comprehensive R....

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....eview of National Small Savings Fund (NSSF). The Thirteenth Finance Commission in its Report had, inter alia, recommended that all aspects of the design and administration of the NSSF be examined with the aim of bringing transparency, market linked rates and other much needed reforms to the scheme. As a follow up of this recommendation, the Government had constituted a Committee on 8th July, 2010, headed by Smt. Shyamala Gopinath, the then Deputy Governor, Reserve Bank of India for comprehensive review of NSSF. The terms of reference of the Committee included review of the existing parameters for the small saving schemes in operation and recommend mechanisms to make them more flexible and market linked; review of the existing terms of the loans extended from the NSSF to the Centre and States and recommend on the changes required in the arrangement of lending the net collection of small savings to Centre and States; review of other possible investment opportunities for the net collections from small savings and the repayment proceeds of NSSF loans extended to States and Centre; review of the administrative arrangement including the cost of operation; and review of the in....

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....centives offered on the small savings investments by the States. 2. The Committee submitted its report to the Government on 7th June, 2011. Comments/views of Department of Posts, Department of Revenue, Department of Financial Services, Department of Expenditure and all State/Union Territory Governments were sought on the recommendations made by the Committee. 3. The recommendations of the Committee have been considered in detail, taking into account the views/comments received from other Departments, States/UTs and representations received from various agents' associations and others. After detailed examination the following decisions have been taken:- Rationalisation of Schemes (i) The maturity period for Monthly Income Scheme (MIS) and National Savings Certificate (NSC) will be reduced from 6 years to 5 years. (ii) A new NSC instrument, with maturity period of 10 years, would be introduced. (iii) Kisan Vikas Patras (KVPs) will be discontinued. (iv) The annual ceiling on investment under Public Provident Fund (PPF) Scheme will be increased from 70,000 to * 1 lakh. (v) Interest on loans obtained from PPF will be increased to 2% p.a. from existing 1% p.a. - - (vi)....

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.... Liquidity of Post Office Time Deposit (POTD) – 1, 2, 3 & 5 years – will be improved by allowing pre-mature withdrawal at a rate of interest 1% less than the time deposits of comparable maturity. For pre-mature withdrawals between 6-12 months of investment, Post Office Savings Account (POSA) rate of interest will be paid. Interest Rates on Small Savings Instruments (i) The rate of interest paid under Post Office Savings Account (POSA) will be increased from 3.5% to 4% p.a. (ii) The rate of interest on small savings schemes will be aligned with G-Sec rates of similar maturity, with a spread of 25 basis points (bps) with two exceptions. The spread on 10 year NSC (new 36 Annex instrument) will be 50 bps and on Senior Citizens Savings Scheme 100 bps. The interest rates for every financial year will be notified before 1st April of that year. (iii) Assuming the date of implementation of the recommendations of the Committee as 1st December, 2011, the rate of interest on various small savings schemes for current financial year on the basis of the interest compounding/payment built in the schemes, will be as given below:- Instrument Current Rate (%) Proposed ....

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....Rate (%) Savings Deposit 3.50 4.0 1 year Time Deposit 6.25 7.7 2 year Time Deposit 6.50 7.8 3 year Time Deposit 7.25 8.0 5 year Time Deposit 7.50 8.3 5 year Recurring Deposit 7.50 8.0 5-year SCSS 9.00 9.0 5 year MIS 8.00 (6 year MIS) 8.2 5 year NSC 8.00 (6 year NSC) 8.4 10 year NSC New Instrument 8.7 PPF 8.00 8.6 Commission to Agents (i) Payment of commission on PPF schemes (1%) and Senior Citizens Savings Scheme (0.5%) will be discontinued. (ii) Agency commission under all other schemes (except MPKBY agents) will be reduced from existing 1% to 0.5%. (iii) Commission at existing rate of 4% will continue for Mahila Pradhan Kshetriya Bachat Yojana (MPKBY) agents. (iv) Incentives, if any, paid by the State/UT Governments will be reduced from the commission paid by the Central Government. Investments from NSSF (i) The minimum share of States in net small savings collections in a year, for investment in State Governments Securities, will be reduced from 80% to 50%. The remaining amount will be invested in Central Government securities or lent to other willing States or in securities issued by infrastructure companies/agencies, wholly owned ....

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....by Central Government. (ii) Yearly repayment of NSSF loans made by Centre and States, will be reinvested in Central and State Government securities in the ratio of 50:50. (iii) The period of repayment of NSSF loans by Centre and States will be reduced to 10 years, with no moratorium. (iv) For the current financial year the prevailing interest rate of 9.5% will continue. From 1st April, 2012 revised interest rate will be notified. (v) Half yearly payment of interest by the Centre and the States will be introduced. (vi) Interest rate on existing investments from NSSF in Central Government securities till 2006-07 will be re-set at 9% and on those from 2007-08 till 2010-11 will be re-set at 9.5%. Operational Issues of NSSF (i) A Monitoring Group drawn from Ministry of Finance, Reserve Bank of India, Department of Posts, State Bank of India, other select banks and select State Governments will be set up to resolve various operational issues like reducing the time lag between collection and investment, etc. 37 Government Debt: Status Paper 4. Necessary notifications, including those requiring amendments to rules of various small saving schemes and National Small Savings ....

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....Fund (Custody & Investment) Rules, 2001 will be notified separately. The above decisions will take effect from the dates to be specified in the notifications. 5. This has the approval of Finance Minister. Sd/- (Shaktikanta Das) Addl. Secretary to the Govt. of India To The Secretary, Department of Posts, Dak Bhawan, New Delhi. 2. Finance Secretary, Department of Revenue, North Block, New Delhi. 3. The Secretary, Department of Expenditure, North Block, New Delhi. 4. The Secretary, Department of Financial Services, Jeevandeep Building, Parliament Street, New Delhi. 5. The Director, National Savings Institute, 4th Floor, CGO Complex, 'A'Block, Seminary Hills, Nagpur. 6. Chief General Manager, Deptt. of Govt. & Bank Accounts, Central Office, Byculla Office Bldg., 4th Floor, Opp. Mumbai Central Railway Station, Byculla, Mumbai-400008. 7. Reserve Bank of India, Central Accounts Section, Additional Office Building, East High Court Road, Nagpur-440001. 8. Chief Secretaries of States/UT Govts. Copy to: President, All India Mahila Pradhan and Small Savings Agents Confederation, Ansari Road, New Delhi. 38 Annex - II : Central Government Outstanding Secu....

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....rities issued to NSSF DETAILS OF SECURITIES ISSUED (As on 31.3.2011) In crore) Category - I 10.5% SPECIAL GOI SECURITIES AGAINST OUTSTANDING BALANCES AS ON 1.4.1999 (73569.19 CRORE) TOTAL 73569.19 73569.19 Category - II 13.5% Special GOI Securities against share of net collections during 1999-2000 (Initial Actual amount Rs. 8978.88 cr.) 6734.16 Cr. In 2010-11 & Rs. 6285.22 Cr. in 2011-12) 12.5% Special GOI Securities against share of net collections during 2000-01 (Initial Actual amount Rs. 8316.26 cr.) (6653.01 Cr. In 2010-11 & Rs. 6237.20 Cr. in 2011-12) 11% Special GOI Securities against share of net collections during 2001-2002 (Initial Actual Amount: 8754.55 Cr.) 7441.37 Cr. In 2010-11 & 7003.64 Cr. in 2011-12) 9.5% Special GOI Securities against share of net collections during 2009-10 (Intial Actual Amount 2500.00 Cr.) 9.5% Special GOI Securities against share of net collections during 2010-11 (Intial Actual Amount 12535.71 Cr.) Total Category - III 01-7% special GOI securities, 2023, issued on 1.4.2003 (13765.58 Cr.) 6285.22 6237.2 7003.64 2500.00 12535.71 34561.77 No. Redemption 02-6% special GOI securities, 2023, issued on 30.9.2003 (326....

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....02.28 Cr.) 03-5.95% special GOI securities, 2024, dtd. 31.3.2004 (13608.87 Cr.) 04-6.96% special GOI securities, 2024, dtd. 31.12.2004 (22665.00 Cr.) 05-7% special GOI securities, 2025, (2005-06) (10010 Cr.) 06-7.5% special GOI securities, 2025 issued on 30.9.2005 (888 Cr.) 07-7.6% special GOI securities, 2026 issued on 31.3.2006 (907.87Cr.) 08-8.17% special GOI securities, 2026, issued on 31.9.2006 (2015.85 Cr) 09-7.88% special GOI securities 2027, issue3d on 31.3.2007 (1832.89 Cr) 10-7.64% special GOI securities 2029 issued on 30.9.2009 (6000 Cr) 11- 8.21% special GOI securities 2030 issued on 31.3.2010 (6058 Cr) Total 110354.30 TOTAL (I+II+III) 218485.26 Annex 39 Government Debt: Status and Road Map Dated Securities Floating Conversion of Special Rate Bonds Securities issued to Dated Securities Annex III: Statement showing Maturity Profile of Market Loans including Floating Rate Bonds (FRBs) and Conversion of special Securities as on 31st March, 2011 Year of Maturity MARKET LOANS Total Col.(2) to SPECIAL SECURITIES Oil Fertiliser Food Others Total Marketing Companies Corporation Col.(8) Companies of India Grand Total Col.(7) Col.....

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....(6) to Col.(11) + Col.(12) Banks Others (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (Amount in Rupees Crore) 2011-12 67581.19 6000.00 0.00 0.00 0.00 73581.19 4000.00 0.00 0.00 362.00 4362.00 77943.19 2012-13 85620.94 5000.00 0.00 0.00 0.00 90620.94 5762.85 0.00 0.00 0.00 5762.85 2013-14 87008.84 4000.00 0.00 4000.00 0.00 95008.84 0.00 0.00 0.00 0.00 0.00 2014-15 158018.36 5000.00 0.00 5000.00 0.00 168018.36 3500.00 0.00 0.00 0.00 3500.00 96383.79 95008.84 171518.36 2015-16 182243.95 12000.00 0.00 3000.00 0.00 197243.95 0.00 0.00 0.00 0.00 0.00 197243.95 2016-17 187129.84 6000.00 0.00 0.00 0.00 193129.84 0.00 0.00 0.00 0.00 0.00 193129.84 2017-18 180773.60 3000.00 0.00 11000.00 0.00 194773.60 0.00 0.00 0.00 0.00 0.00 194773.60 2018-19 139347.88 0.00 0.00 6130.00 0.00 145477.88 0.00 0.00 0.00 0.00 0.00 145477.88 2019-20 111000.00 0.00 0.00 12000.00 0.00 123000.00 0.00 0.00 0.00 0.00 0.00 123000.00 2020-21 71000.00 8000.00 0.00 0.00 0.00 79000.00 0.00 0.00 0.00 100 100.00 79100.00 2021-22 131213.32 0.00 1632.33 0.00 0.00 13284....

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....5.65 10000.00 0.00 0.00 400 10400.00 143245.65 2022-23 107000.00 0.00 5464.69 11000.00 0.00 123464.69 0.00 20000.00 5000.00 0.00 25000.00 148464.69 2023-24 19000.00 0.00 0.00 8000.00 0.00 27000.00 31150.00 2024-25 10000.00 0.00 0.00 0.00 0.00 10000.00 52860.17 3890.00 0.00 0.00 5000.00 9996.01 45036.01 72036.01 0.00 57860.17 67860.17 2025-26 0.00 0.00 0.00 16687.95 0.00 16687.95 0.00 3610.00 2026-27 68000.00 0.00 4388.55 0.00 0.00 72388.55 36913.00 0.00 0.00 6200.00 0.00 3610.00 20297.95 0.00 43113.00 115501.55 2027-28 66000.00 0.00 2679.57 0.00 0.00 68679.57 0.00 0.00 0.00 0.00 0.00 68679.57 2028-29 11000.00 0.00 0.00 0.00 0.00 11000.00 0.00 0.00 0.00 0.00 0.00 11000.00 2031-32 50000.00 0.00 2687.11 0.00 0.00 52687.11 0.00 0.00 0.00 0.00 0.00 52687.11 2032-33 72000.00 0.00 3956.50 0.00 0.00 75956.50 0.00 0.00 0.00 0.00 0.00 75956.50 2034-35 60000.00 350.00 0.00 0.00 0.00 60350.00 0.00 0.00 0.00 0.00 0.00 60350.00 2035-36 42000.00 0.00 0.00 0.00 0.00 42000.00 0.00 0.00 0.00 0.00 0.00 42000.00 2036-37 59000.00 0.00 0.00 0.00 0.00 5900....

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....0.00 0.00 0.00 0.00 0.00 0.00 59000.00 2038-39 13000.00 0.00 0.00 0.00 0.00 13000.00 0.00 0.00 0.00 0.00 0.00 13000.00 2040-41 32000.00 0.00 0.00 0.00 0.00 32000.00 0.00 0.00 0.00 0.00 0.00 32000.00 Total 2009937.92 49350.00 20808.75 76817.95 0.00 2156914.62 144186.02 27500.00 16200.00 10858.01 198744.03 2355658.65 Memo Items: Unclaimed Amount/ Outstanding agianst matured Securities 648.26 Total 2157562.88 40 Annex - IV: Statement showing Weighted Average Interest Rate of Interest (Maturity year wise) on Market Loans including FRBs Conversion of Special Securities to Banks and Special Securities to others as on 31st March, 2011 Annex MARKET LOANS Year of Maturity Dated Securities Floating Conversion of Special Rate Bonds Securities issued to Dated Securities Total Col.(2) to SPECIAL SECURITIES Oil Fertiliser Food Others Total Marketing Companies Corporation Col.(8) Companies of India Grand Total Col.(7) Col.(6) to Col.(11) + Col.(12) Banks Others (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (Weighted Average Rate of Interest) 2011-12 10.19 3.89 0.00 0.00 0.00 9.68 7.46 ....

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.... 0.00 0.00 6.10 7.34 9.15 2012-13 8.36 7.81 0.00 0.00 0.00 8.32 7.00 0.00 0.00 0.00 7.00 8.23 2013-14 8.12 4.81 0.00 7.27 0.00 7.95 0.00 0.00 0.00 0.00 0.00 7.95 2014-15 7.61 4.01 0.00 7.37 0.00 7.49 7.60 0.00 0.00 0.00 7.60 7.50 2015-16 7.95 4.19 0.00 7.38 0.00 7.57 0.00 0.00 0.00 0.00 0.00 7.57 2016-17 8.07 3.91 0.00 0.00 0.00 7.92 0.00 0.00 0.00 0.00 0.00 7.92 2017-18 7.51 4.12 0.00 6.81 0.00 7.38 0.00 0.00 0.00 0.00 0.00 7.38 2018-19 7.49 0.00 0.00 5.69 0.00 7.42 0.00 0.00 0.00 0.00 0.00 7.42 2019-20 6.78 0.00 0.00 6.18 0.00 6.71 0.00 0.00 0.00 0.00 0.00 6.71 2020-21 11.11 3.79 0.00 0.00 0.00 8.82 0.00 0.00 0.00 11.50 11.50 8.82 2021-22 8.62 0.00 8.20 0.00 0.00 8.61 7.94 0.00 0.00 9.75 8.01 8.55 2022-23 8.35 0.00 8.10 5.87 0.00 7.87 0.00 6.74 8.15 0.00 7.02 7.63 2023-24 6.26 0.00 0.00 6.17 0.00 6.23 8.17 8.30 0.00 8.35 8.22 7.48 2024-25 7.35 0.00 0.00 0.00 0.00 7.35 7.41 0.00 8.03 0.00 7.47 8.04 2025-26 0.00 0.00 0.00 5.97 0.00 5.97 0.00 7.95 0.00 0.00 7.95 6.32 2026-27 8.69 0.00 8.24 0.00 ....

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.... 0.00 8.66 7.40 0.00 8.23 0.00 7.52 8.22 2027-28 6.01 0.00 8.27 0.00 0.00 6.35 0.00 0.00 0.00 0.00 0.00 6.35 2028-29 6.13 0.00 0.00 0.00 0.00 6.13 0.00 0.00 0.00 0.00 0.00 6.13 2031-32 8.28 0.00 8.28 0.00 0.00 8.28 0.00 0.00 0.00 0.00 0.00 8.28 2032-33 7.95 0.00 8.32 0.00 0.00 7.97 0.00 0.00 0.00 0.00 0.00 7.97 2034-35 7.50 6.49 0.00 0.00 0.00 7.49 0.00 0.00 0.00 0.00 0.00 7.49 2035-36 7.40 0.00 0.00 0.00 0.00 7.40 0.00 0.00 0.00 0.00 0.00 7.40 2036-37 8.33 0.00 0.00 0.00 0.00 8.33 0.00 0.00 0.00 0.00 0.00 8.33 2038-39 6.83 0.00 0.00 0.00 0.00 6.83 0.00 0.00 0.00 0.00 0.00 6.83 41 Government Debt: Status Paper Annex - V: List of Government of India Securities Outstanding as on March 31, 2011 - Maturity Year Wise (* In crore) Maturity Year Wise Sl.No. Nomenclature Date of Issue Date of Maturity Security wise Outstanding Stock Outstanding stock 2011-12 1 8.00% GS 2011 27-Apr-1981 27-Apr-2011 1,472.92 234569 10.95% GS 2011 30-May-2000 30-May-2011 12,000.00 9.39% GS 2011 2-Jul-2001 2-Jul-2011 37,000.00 11.50% GS 2011 5-Aug-1991 5-Aug-2011 2,861....

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.....36 FRB,2011 8-Aug-2003 8-Aug-2011 6,000.00 12.00% GS 2011 21-Oct-1991 21-Oct-2011 3,246.91 7 11.50% GS 2011(II) 24-Nov-2000 24-Nov-2011 11,000.00 73,581.19 2012-13 8 6.85% GS 2012 5-Apr-2002 5-Apr-2012 26,000.00 9 7.40% GS 2012 3-May-2002 3-May-2012 33,000.00 10 10.25% GS 2012 1-Jun-1984 11 6.72% GS 2007/12 18-Jul-2002 1-Jun-2012 18-Jul-2012 1,574.13 546.81 12 11.03% GS 2012 18-Jul-2000 18-Jul-2012 13,500.00 13 9.40% GS 2012 11-Sep-2001 14 FRB, 2012 10-Nov-2003 11-Sep-2012 11,000.00 10-Nov-2012 5,000.00 90,620.94 2013-14 15 9.00% GS 2013 24-May-1982 24-May-2013 1,751.33 16 9.81% GS 2013 30-May-2001 30-May-2013 11,000.00 17 12.40% GS 2013 20-Aug-1998 20-Aug-2013 11,983.91 18 7.27% GS 2013 (conv) 3-Sep-2002 3-Sep-2013 46,000.00 222 19 FRB, 2013 10-Sep-2004 10-Sep-2013 4,000.00 20 6.72% GS 2014 24-Feb-2003 24-Feb-2014 15,273.60 21 5.32% GS 2014 16-Feb-2004 16-Feb-2014 5,000.00 95,008.84 2014-15 222222222 23 7.37% GS 2014 6.07% GS 2014 16-Apr-2002 16-Apr-2014 42,000.00 15-May-2009 15-May-2014 40,000.00 24 FRB, 2014 20-May-2003 20-May-2014 5,000.00 25 10.00% GS 2014 30-May-1983 30-May-2014 2,333.2....

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....6 26 7.32% GS 2014 27 10.50% GS 2014 28 7.56% GS2014 29 11.83% GS 2014 30 10.47% GS 2015 20-Oct-2009 29-Oct-1984 3-Nov-2008 12-Nov-1999 12-Feb-2001 20-Oct-2014 18,000.00 29-Oct-2014 1,755.10 3-Nov-2014 41,000.00 12-Nov-2014 11,500.00 12-Feb-2015 6,430.00 168,018.36 2015-16 31 10.79% GS 2015 32 11.50% GS 2015 33 6.49% GS 2015 34 7.17% GS 2015 19-May-2000 21-May-1985 8-Jun-2009 14-Jun-2010 19-May-2015 2,683.45 21-May-2015 3,560.50 8-Jun-2015 40,000.00 14-Jun-2015 56,000.00 35 FRB, 2015 2-Jul-2004 2-Jul-2015 6,000.00 36 11.43% GS 2015 7-Aug-2000 7-Aug-2015 12,000.00 37 FRB, 2015(II) 10-Aug-2004 10-Aug-2015 6,000.00 38 7.38% GS 2015 (conv) 3-Sep-2002 3-Sep-2015 61,000.00 39 9.85% GS 2015 16-Oct-2001 16-Oct-2015 10,000.00 197,243.95 42 Annex Sl.No. Nomenclature Date of Issue Date of Maturity Security wise Outstanding Maturity Year Wise Stock Outstanding stock 2016-17 40 7.59% GS 2016 12-Apr-2006 12-Apr-2016 50,000.00 41 10.71% GS 2016 19-Apr-2001 19-Apr-2016 9,000.00 42 FRB, 2016 7-May-2004 7-May-2016 6,000.00 43 5.59% GS 2016 4-Jun-2004 4-Jun-2016 6,000.00 44 12.30% GS 2016 45 7.02% GS 2016 ....

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....2-Jul-1999 17-Aug-2009 2-Jul-2016 13,129.84 46 8.07% GS 2017 15-Jan-2002 17-Aug-2016 60,000.00 15-Jan-2017 49,000.00 193,129.84 2017-18 47 7.49% GS 2017 (con) 16-Apr-2002 48 FRB-2017 2-Jul-2002 49 7.99% GS 2017 9-Jul-2007 16-Apr-2017 58,000.00 2-Jul-2017 9-Jul-2017 59,000.00 3,000.00 50 7.46% GS 2017 28-Aug-2002 28-Aug-2017 57,886.80 51 6.25% GS 2018 (conv) 2-Jan-2003 2-Jan-2018 16,886.80 194,773.60 2018-19 52 8.24% GS 2018 22-Apr-2008 22-Apr-2018 50,000.00 53 10.45% GS 2018 30-Apr-2001 30-Apr-2018 3,716.00 54 5.69% GS 2018(Conv)] 25-Sep-2003 25-Sep-2018 16,130.00 55 12.60% GS 2018 23-Nov-1998 56 5.64% GS 2019 2-Jan-2004 57 6.05% GS 2019 (FEB) 2-Feb-2009 23-Nov-2018 12,631.88 2-Jan-2019 10,000.00 2-Feb-2019 53,000.00 145,477.88 2019-20 58 6.05% GS 2019 (con) 12-Jun-2003 59 6.90% GS 2019 13-Jul-2009 60 10.03% GS 2019 9-Aug-2001 12-Jun-2019 11,000.00 13-Jul-2019 45,000.00 9-Aug-2019 6,000.00 61 6.35% GS 2020 (con) 2-Jan-2003 2-Jan-2020 61,000.00 123,000.00 2020-21 62 10.70% GS 2020 22-Apr-2000 22-Apr-2020 6,000.00 63 7.80% GS 2020 64 FRB, 2020 3-May-2010 21-Dec-2009 3-May-2020 60,000.00 21-Dec-2020....

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.... 8,000.00 65 11.60% GS 2020 27-Dec-2000 27-Dec-2020 5,000.00 79,000.00 2021-22 66 7.94% GS 2021 24-May-2006 24-May-2021 49,000.00 67 10.25% GS 2021 68 8.20% GS 2022 30-May-2001 15-Feb-2007 30-May-2021 26,213.32 15-Feb-2022 57,632.33 132,845.65 2022-23 69 8.35% GS 2022 14-May-2002 14-May-2022 44,000.00 70 8.08% GS 2022 02-Aug-2007 2-Aug-2022 30,969.41 71 5.87% GS 2022 (conv) 28-Aug-2003 28-Aug-2022 11,000.00 72 8.13% GS 2022 21-Sep-2007 21-Sep-2022 37,495.28 123,464.69 2023-24 73 6.30% GS 2023 9-Apr-2003 9-Apr-2023 13,000.00 74 6.17% GS 2023 (conv) 12-Jun-2003 12-Jun-2023 14,000.00 27,000.00 2024-25 75 7.35% GS 2024 22-Jun-2009 22-Jun-2024 10,000.00 10,000.00 43 Government Debt: Status Paper Sl.No. Nomenclature Date of Issue Date of Maturity Security wise Outstanding Stock Maturity Year Wise Outstanding stock 2025-26 76 5.97% GS 2025 (Conv) 25-Sep-2003 25-Sep-2025 16,687.95 16,687.95 2026-27 77 10.18% GS 2026 11-Sep-2001 11-Sep-2026 15,000.00 78 8.24% GS 2027 15-Feb-2007 15-Feb-2027 57,388.55 72,388.55 2027-28 79 8.26% GS 2027 02-Aug-2007 02-Aug-2027 52,427.33 80 8.28% GS 2027 21-Sep-2007 21-Sep....

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....-2027 1,252.24 81 6.01% GS 2028 08-Aug-2003 25-Mar-2028 15,000.00 68,679.57 2028-29 82 6.13% GS 2028 04-Jun-2003 04-Jun-2028 11,000.00 11,000.00 2031-32 83 8.28% GS 2032 15-Feb-2007 15-Feb-2032 52,687.1 52,687.11 2032-33 84 8.32% GS 2032 02-Aug-2007 02-Aug-2032 15,434.02 85 7.95% GS 2032 28-Aug-2002 28-Aug-2032 59,000.00 86 8.33% GS 2032 21-Sep-2007 21-Sep-2032 1,522.48 75,956.50 2034-35 87 88 7.50% GS 2034 FRB, 2035 10-Aug-2004 25-Jan-2005 10-Aug-2034 60,000.00 25-Jan-2035 350.00 60,350.00 2035-36 89 7.40% GS 2035 09-Sep-2005 09-Sep-2035 42,000.00 42,000.00 2036-37 90 8.33% GS 2036 07-Jun-2006 07-Jun-2036 59,000.00 59,000.00 2038-39 91 6.83% GS 2039 19-Jan-2009 19-Jan-2039 13,000.00 13,000.00 2040-41 92 8.30% GS 2040 02-Jul-2010 02-Jul-2040 32,000.00 32,000.00 Total 2,156,914.62 2,156,914.62 44 Annex Annex - VI: List of Government of India Securities Outstanding as on March 31, 2011 - Interest Rate Wise (In crore) Sl.No. Nomenclature Date of Maturity Amount Total % of Govt. Security GOI Securities bearing Interest rate less than or equal to 7% 1 GOI Floating Rate Bonds, 2020 21.12.2020 8000.00 2 ....

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.... GOI Floating Rate Bonds, 2016 07.05.2016 6000.00 3 GOI Floating Rate Bonds, 2014 20.05.2014 5000.00 4 GOI Floating Rate Bonds, 2015 02.07.2015 6000.00 5 GOI Floating Rate Bonds, 2011 08.08.2011 6000.00 6 GOI Floating Rate Bonds, 2017 02.07.2017 3000.00 7 GOI Floating Rate Bonds, 2015(II) 10.08.2015 6000.00 8 5.32% Government Stock.2014 16.02.2014 5000.00 9 5.59% Government Stock.2016 04.06.2016 6000.00 10 5.64% Government Stock 2019 02.01.2019 10000.00 11 5.69% Government Stock.2018 12 5.69% Government Stock 2018 25.09.2018 10000.00 25.09.2018 6130.00 13 GOI Floating Rate Bonds, 2012 10.11.2012 5000.00 14 GOI Floating Rate Bonds, 2013 10.09.2013 4000.00 15 5.87% Government Stock 2022 28.08.2022 11000.00 16 5.97% Government Stock 2025 25.09.2025 16687.95 17 6.01% Government Stock 2028 18 6.05% Government Stock 2019 19 6.05% Government Stock 2019 20 6.05% Government Stock.2019 21 6.07% Government Stock.2014 22 6.13% Government Stock 2028 23 6.17% Government Stock 2023 24 6.17% Government Stock.2023 25 6.25% Government Stock.2018 26 6.25% Government Stock 2018 27 6.30% Government Stock 2023 28 6.35% Government Stock.....

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....2020 29 6.35% Government Stock.2020 30 6.49% Government Stock.2015 31 6.72% Government Stock 2007/2012 02.01.2018 09.04.2023 13000.00 02.01.2020 56000.00 02.01.2020 5000.00 08.06.2012 40000.00 18.07.2012 546.81 32 6.72% Government Stock.2014 33 6.83% Government Stock 2039 34 6.85% Government Stock.2012 35 6.90% Government Srock.2019 24.02.2014 15273.60 19.01.2039 13000.00 05.04.2012 13.07.2019 26000.00 45000.00 25.03.2028 15000.00 02.02.2019 53000.00 12.06.2019 4000.00 12.06.2019 7000.00 15.05.2014 40000.00 04.06.2028 11000.00 12.06.2023 6000.00 12.06.2023 8000.00 02.01.2018 10886.80 6000.00 488525.16 22.6 GOI Securities bearing Interest rate above 7% but less than or equal to 8% 36 7.02% Government Stock.2016 37 7.17% Government Stock.2015 17.08.2016 60000.00 14.06.2015 56000.00 38 39 GOI Floating Rate Bonds, 2035 7.27% Government Stock.2013 40 7.27% Government Stock 2013 25.01.2035 350.00 03.09.2013 42000.00 03.09.2013 4000.00 41 7.32% Government Stock, 2014 42 7.35% Government Stock.2024 43 7.37% Government Stock.2014 44 7.37% Government Stock 2014 45 7.38% Government Stock.2015 46 7.38% Government Stock 2015 20.....

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....10.2014 18000.00 22.06.2024 10000.00 16.04.2014 37000.00 16.04.2014 5000.00 03.09.2015 58000.00 03.09.2015 3000.00 47 48 7.40% Government Stock.2012 7.40% Government Stock 2035 03.05.2012 33000.00 09.09.2035 42000.00 45 Government Debt : Status Paper Sl.No. Nomenclature of Govt. Security 49 7.46% Government Stock.2017 50 7.49% Government Stock.2017 51 7.49% Government Stock 2017 52 7.50% Government Stock 2034 53 7.56% Government Stock, 2014 54 7.59% Government Stock.2016 55 7.80% Government Stock.2020 56 7.80% Government Stock.2021 57 7.83% Government Stock.2018 58 7.94% Government Stock 2021 Date of Maturity Amount Total % 28.08.2017 57886.80 16.04.2017 53000.00 16.04.2017 5000.00 10.08.2034 60000.00 03.11.2014 41000.00 12.04.2016 50000.00 03.05.2020 60000.00 11.04.2021 0.00 11.04.2018 0.00 24.05.2021 49000.00 59 7.95% Government Stock 2032 28.08.2032 59000.00 60 7.99% Government Stock 2017 09.07.2017 59000.00 61 8.00% Loan, 2011 27.04.2011 1472.92 863709.72 40.0 GOI Securities bearing Interest rate above 8% but less than or equal to 9% 62 8.07% Government Stock.2017 63 8.08% Government Stock 2022 64 8.08% Government ....

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....Stock 2022 65 8.13% Government Stock 2022 66 8.13% Government Stock 2022 67 8.20% Government Stock 2022 68 8.20% Government Stock 2022 69 8.24% Government Stock.2018 70 8.24% Government Stock 2027 71 8.24% Government Stock 2027 72 8.26% Government Stock 2027 73 8.26% Government Stock 2027 74 8.28% Government Stock 2027 75 8.28% Government Stock 2032 76 8.28% Government Stock 2027 77 8.28% Government Stock 2032 78 8.30% Government Stock 2040 79 8.32% Government Stock 2032 80 8.32% Government Stock 2032 81 8.33% Government Stock 2036 82 8.33% Government Stock 2032 83 8.35% Government Stock 2022 84 8.79% Government Stock 2021 85 8.83% Government Stock 2041 86 8.97% Government Stock 2030 15.01.2017 49000.00 02.08.2022 02.08.2022 28000.00 2969.41 21.09.2022 35000.00 21.09.2022 15.02.2022 2495.28 56000.00 15.02.2022 1632.33 50000.00 22.04.2018 15.02.2027 53000.00 15.02.2027 4388.55 02.08.2027 51000.00 02.08.2027 21.09.2027 15.02.2032 21.09.2027 1427.33 0.00 50000.00 1252.24 15.02.2032 2687.11 02.07.2040 32000.00 02.08.2032 13000.00 02.08.2032 2434.02 07.06.2036 21.09.2032 14.05.2022 08.11.2021 12.12.2041 59000.00 1522.48 4400....

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....0.00 0.00 0.00 05.12.2030 0.00 87 9.00% Loan, 2013 24.05.2013 1751.33 542560.08 25.2 GOI Securities bearing Interest rate above 9% 93 88 9.15% Government Stock.2024 89 9.39% Government Stock.2011 90 9.40% Government Stock.2012 91 9.81% Government Stock.2013 92 9.85% Government Stock.2015 10% Loan, 2014 94 10.03% Government Stock.2019 95 10.18% Government Stock 2026 0.00 02.07.2011 37000.00 11.09.2012 11000.00 30.05.2013 11000.00 16.10.2015 10000.00 30.05.2014 2333.26 09.08.2019 6000.00 11.09.2026 15000.00 14.11.2024 46 Annex Sl.No. Nomenclature of Govt. Security Date of Maturity Amount Total % 96 10.25% Loan, 2012 01.06.2012 1574.13 97 10.25% Government Stock 2021 98 10.45% Government Stock.2018 99 10.47% Government Stock.2015 100 10.50% Loan, 2014 30.05.2021 26213.32 30.04.2018 3716.00 101 10.70% Government Stock.2020 102 10.71% Government Stock.2016 103 10.79% Government Stock.2015 104 10.95% Government Stock.2011 105 11.03% Government Stock.2012 106 11.43% Government Stock.2015 107 11.50% Loan, 2011 108 11.50% Government Stock.2011 109 11.50% Loan, 2015 110 11.60% Government Stock.2020 111 11.83% Government Stock. 2014 ....

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.... 112 12.00% Loan, 2011 113 12.30% Government Stock.2016 114 12.40% Government Stock. 2013 115 12.60% Government Stock.2018 12.02.2015 6430.00 29.10.2014 1755.10 22.04.2020 6000.00 19.04.2016 9000.00 19.05.2015 2683.45 30.05.2011 12000.00 18.07.2012 13500.00 07.08.2015 12000.00 05.08.2011 2861.36 24.11.2011 11000.00 21.05.2015 3560.50 27.12.2020 5000.00 12.11.2014 11500.00 21.10.2011 3246.91 02.07.2016 13129.84 20.08.2013 11983.91 23.11.2018 12631.88 262119.66 12.2 2156914.62 2156914.62 100.0 47 Government Debt : Status Paper Annex - VII: Donor-wise Debt Outstanding of the Country as on 31st March, 2011 (US$ in Million & in Crore) Sl. No. Donor Government Loan (US$) (INR) 1 Asian Development Bank 6813.22 30455.08 2 Japan 14744.36 65907.29 3 IBRD 8733.55 39217.77 4 IDA 26637.06 119067.67 5 IFAD 312.73 1397.92 6 EEC 29.28 130.86 7 Germany 2662.07 11899.45 8 France 391.57 1750.34 9 Italy 0.39 1.75 10 Russian Federation 1579.81 7061.76 11 Switzerland 4.32 19.31 12 United States of America 333.17 1489.25 13 OPEC 12.64 56.49 Grand Total 62294.17 278454.94 Note 1. DOD in INR calculated as prevailin....

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....g rate i.e. @Rs. 44.70 as on 31st March, 2011. 2. Figures include details of External Assistance and exclude PPF (Project Preparatory Fund) (Advance), IMF, FII Debt and Defence. 48<BR> News - Press release - PIB....