The Indian government has unveiled its borrowing plans for the second half of the fiscal year, with plans to borrow ₹6.55 trillion. This borrowing represents 42.45% of the government’s total gross market borrowing target for the full fiscal year, which is ₹15.43 trillion. Despite economic challenges, the government has decided to keep its borrowing plans unchanged.
The borrowing for the fiscal year will be accomplished through the issuance of dated securities, including ₹20,000 crore to be raised through sovereign green bonds, according to a statement from the finance ministry.
In response to market demand for longer-duration securities, the government will issue 50-year securities for the first time. This move is seen as an effort to diversify its debt offerings and cater to investors seeking longer-term investments.
The borrowing program has been developed in consultation with the Reserve Bank of India (RBI), and the government plans to complete the borrowing for the second half of the fiscal year through 20 weekly auctions. These auctions will include a range of securities with varying maturities, such as 3-year, 5-year, 7-year, 10-year, 14-year, 30-year, 40-year, and the new 50-year securities.
The government’s fiscal deficit target for the fiscal year 2023-24, as projected in Finance Minister Nirmala Sitharaman’s budget speech, is ₹17.86 trillion, which represents 5.9% of the nominal gross domestic product (GDP). The government has set an ambitious target of reducing the fiscal deficit to below 4.5% of GDP by fiscal year 2025-26.
The allocation of borrowing under different maturities will be as follows:
- 3-year: 6.11%
- 5-year: 11.45%
- 7-year: 9.16%
- 10-year: 22.90%
- 14-year: 15.27%
- 30-year: 12.21%
- 40-year: 18.32%
- 50-year: 4.58%
To smoothen the redemption profile, the government will conduct switch auctions, with ₹1 trillion budgeted for such operations. A portion of this amount has already been utilized in conducted switch auctions, and the remainder will be used in the second half of the fiscal year.
Additionally, the government will continue to exercise a greenshoe option, allowing for an additional subscription of up to ₹2,000 crore against each of the securities specified in the auction notification.
The government also revealed its plans for weekly borrowing through the issuance of Treasury Bills in the third quarter of fiscal year 2023-24. This includes an expected borrowing of ₹24,000 crore with a net borrowing of ₹(-)52,000 crore during the quarter.
To address temporary mismatches in government accounts, the Reserve Bank of India (RBI) has set the Ways and Means Advances (WMA) limit for the second half of fiscal year 2023-24 at ₹50,000 crore.
The finance ministry emphasized that the borrowing calendar is subject to change if circumstances warrant it. Both the Centre and the RBI will maintain flexibility in modifying the borrowing calendar, including adjustments to the notified amount, issuance period, maturity, and the issuance of different types of instruments based on market conditions and government requirements.
