India To Borrow Rs 4.88 Lakh Crore In First Half Of FY21

India will raise Rs 4.88 lakh crore through gross market borrowings in the first six months of the financial year ending March 2021.

The borrowing from April and September, which includes repayment of past loans, will be 62.56 percent of the total gross borrowing for the next financial year, said Economic Affairs Secretary Atanu Chakraborty. That compares with 62.25 percent a year earlier.

“The government is committed to its requirements for fighting Covid-19 whether on account of health issues or protecting the economy, and providing necessary stimulus at any time,” Chakraborty said. The entire borrowing plan has been “designed in that fashion”, he said.

India will issue weekly government securities of Rs 19,000-21,000 crore as compared to Rs 17,000 crore in the last year. These will have a maturity of 2, 5, 10, 14, 30 and 40 years, Chakraborty said. Floating-rate bonds of a tenor of 13 years will also be issued, he said.

Weekly borrowings will be undertaken through treasury bills of Rs 25,000 crore in the first quarter, involving net borrowing of Rs 1.37 lakh crore in April-June.

The government plans to raise Rs 7.8 lakh crore in gross borrowings, including repayments of past loans, in FY21. Net borrowings are pegged at Rs 5.36 lakh crore.

The borrowing plan has been drawn up keeping in view the anticipated demand because of the Fully Accessible Route being opened up for non-residents investors for special securities, Chakraborty said. This will have downward pressure on interest rates, he said.

While the government has to pump prime the economy because of Covid-19, factoring in decline in economic growth and falling trajectory of household savings, higher borrowing in the first half of the fiscal year could have pushed interest rates higher, said Devendra Pant, chief economist at India Ratings.

Fully accessible route for non-resident investors will help it mobilise higher borrowing, he said, adding that increase in weekly issues will help raise a bigger amount that will reduce the pressure on interest rates.

India’s first debt ETF of government securities will be rolled out in the second half of FY21.