Government Keeps Second Half Borrowing Plan Unchanged
The government has left its planned borrowings for the second half of the year unchanged. The government has, however, absorbed the additional funds needed for GST compensation to states within the existing borrowing calendar.
In a release on Monday, the government said that:
Out of the planned gross market borrowing of Rs 12.05 lakh crore projected for FY22, Rs 7.02 lakh crore was borrowed in the first half.
The government now plans to borrow the balance Rs 5.03 lakh crore in second half.
The second half projection also factors in dues to states in-lieu of GST compensation during the year.
Borrowing for the first half were completed at a weighted average yield of 6.19% and weighted average maturity at 16.69 years. "In the first half, good demand for Government bonds was seen from all major investor segments and the yields have remained stable," the Finance Ministry said.
The second half borrowing calendar has provided a positive surprise, said Aditi Nayar, chief economist at ICRA Ltd. While the amount is in-line with the budget, it has absorbed the back-to-back GST compensation loan to be provided to the states, she said.
The implication is that the government's fiscal deficit will be around Rs 1.6 lakh crore lower than budgeted, despite the modest rise in expenditure, a clear confirmation of the revenue upturn that is underway.Aditi Nayar, Chief Economist, ICRA
ICRA expects a 10 basis points drop in the benchmark 10-year bond yield as a result of the borrowing calendar. "The 10-year bond yield is likely to range between 6.0-6.2% in the coming quarter, with rising crude oil prices to counteract the benign borrowing figures."
The government’s second half borrowing will be spread across 21 weekly tranches of about Rs 24,000 crore.
Borrowing will be spread across securities ranging from 2-years to 40-years and will also include floating rate bonds.
The share of borrowing under different maturities will be:
Floating Rate Bonds: 8.8%.
"The Government will issue another floating rate bond of 7-8 years, in addition to 13-year," the ministry said. "Both will be issued on alternate basis."
Alongside, the government also released its plan for shorter term borrowings via treasury bills.
Weekly borrowing via treasury bills are expected to be Rs 20,000 crore. The net borrowing during the quarter will be (-) Rs 1.04 lakh crore.
To take care of temporary mismatches in government account, the Reserve Bank of India has fixed the 'Ways and Mean Advance' (WMA) limit for the second half at Rs 50,000 crore. This has been normalised from an elevated limit of Rs 1.2 lakh crore until September 2021.