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India Sticks To Its Rs 12-Lakh-Crore Borrowing Plan For FY21

The move comes despite expectations that the government may need to raise more funds to support the economy.

Workers unload a statue of the Indian national emblem Ashoka Stambha outside the the North Block of the Central Secretariat in New Delhi, India. (Photographer: Anindito Mukherjee/Bloomberg)
Workers unload a statue of the Indian national emblem Ashoka Stambha outside the the North Block of the Central Secretariat in New Delhi, India. (Photographer: Anindito Mukherjee/Bloomberg)

India has retained its market borrowing target of Rs 12 lakh crore for the ongoing fiscal despite expectations that the government may need to raise more funds to support the economy.

The government’s market borrowing for October-March would be Rs 4.34 lakh crore, or about 36.16% of the total borrowing slated for the year, said Economic Affairs Secretary Tarun Bajaj. This would be done through 16 weekly auctions of Rs 27,000-28,000 crore per week, Bajaj told reporters on Sept. 30.

Tenor-wise details of auction is as follows:

  • Rs 24,000 crore will be raised through 2-year tenor securities.
  • Rs 68,000 crore will be raised through 5-year tenor securities.
  • Rs 96,000 crore will be raised through 10-year G-secs.
  • Rs 90,000 crore will be raised through 14-year tenor securities.
  • Rs 72,000 crore will be raised through 30-year tenor securities.
  • Rs 52,000 crore will be raised through 40-year tenor securities.
  • Rs 32,000 crore will be raised through floating rate bonds.

The government has already borrowed Rs 7.66 lakh crore, or 63.83% of its total market borrowings, Bajaj said. The government was expected to raise its market borrowing as more resources would be needed for announcing a fiscal stimulus package to lift the economy that contracted 23.9% in April-June.

The government, in its borrowing estimates, has factored in the need for a fiscal stimulus, Bajaj responded to a query on whether the need for a fiscal stimulus would raise government’s borrowing later during the year.

By December, there will be more clarity whether government will need to borrow more or not, said Devendra Pant, chief economist India Ratings. The growth, source of growth--either consumption-led or through higher government spending, among others--would dictate the trajectory of government market borrowing, he added.

Based on the revenue estimates, “that are looking up”, we anticipate Rs 12 lakh crore will suffice the government’s needs, Bajaj said. He however, said the government isn’t expecting Rs 2.1 lakh crore—the ambitious divestment target for current fiscal—in divestment receipts in 2020-21. The government has factored in lower divestment receipts for the year in its borrowing calculation, Bajaj said, while declining to share the new divestment target.

The government’s borrowing programme will be completed by Jan. 29, or almost at the same time as last year, Bajaj said. That would leave space for private sector borrowings, which are expected to pick up in third and fourth quarter, and state government borrowings, he said.

The Reserve Bank of India is ensuring enough liquidity in the market to borrow at reasonable yields. The weighted average yield for the government has been 5.82%, which is the lowest in the last 15 years, Bajaj said. The ways and means advances--short-term borrowings used for government’s cash managements--limit has been reduced from Rs 2 lakh crore to Rs 1.25 lakh crore in consultation with RBI, Bajaj said. This could suggest the cash situation of the government will be better, and there will be less volatility in its finances in the second half of the year.