India’s Total Debt Rose To Rs 88.18 Lakh Crore in April-June

India’s total liabilities rose in the quarter ended June on the back of increased government borrowings from the market.

Liabilities rose around 4 percent over the previous quarter to Rs 88,18,392 crore in the three months through June, according to the Quarterly Report on Public Debt Management.

The nation’s debt-to-GDP ratio rose to 45.8 percent from 45 percent in March. The government’s public debt—or total liabilities that need to be paid for from the Consolidated Fund of India—too, increased 4.22 percent over last quarter to Rs 7.89 lakh crore as of June 30, according to the report.

India’s external debt, the report said, increased 3.4 percent quarter-on-quarter to Rs 5.3 lakh crore during April-June.

Yields Soften

The weighted average yield of government securities in the three-month period dropped to 7.21 percent compared with 7.47 percent in the previous quarter and 7.76 percent in April-June 2018.

Softening of government security yields was due to a 50-basis-point cut in repo rate by the Reserve Bank of India, Open Market Operation purchases, and downward movement in the U.S. 10-year Treasury bond yields, the report said.

Yields on the 10-year benchmark security rose till April 23 to 7.47 percent on the back of rising Brent crude oil prices and a deficit in market liquidity conditions during the period. Injection of liquidity by the RBI through dollar-rupee swaps and OMO purchases provided support to the market, the report said.

Yields dropped to 7.03 percent in May due to deceleration in GDP growth during April-March, fuelling expectations of a further cut in the policy rate by the RBI. More OMO purchases, and U.S. Federal Reserve’s assurance to appropriately act to sustain economic expansion helped the yields drive down further, the report said.

Holding Pattern

The share of government securities held by commercial banks fell to 40.3 percent as of March compared with 42.7 percent a year ago.

While the share of foreign portfolio investors holding government securities fell, that of insurers, RBI and financial institutions rose.