India To Borrow Rs 2.88 Lakh Crore In First Half Of 2018-19

In April-Sep 2017, the govt borrowed Rs 2.3 lakh cr on a net basis, while its gross borrowing was Rs 3.72 lakh cr.

The new Rs 2,000 currency note.

(Photo: The Quint)

The Indian government plans to borrow Rs 2.88 lakh crore between April-September in the upcoming fiscal, said Subhash Garg, secretary at the Department of Economic Affairs. That’s 47.56 percent of the budgeted gross borrowing plan.

The government has introduced issuances in the 1-4 year bucket for the financial year 2018-19, Garg told reporters at a media briefing on Monday. There will be 24 issuances of Rs 12,000 crore each in the first half of the financial year, he added.

The Monitoring Group on Cash and Debt Management met Saturday to finalise government’s borrowing calendar for the first half of the next financial year.

In April-September 2017, the government had borrowed Rs 2.3 lakh crore on a net basis, while its gross borrowing was Rs 3.72 lakh crore for the same period.

Finance Minister Arun Jaitley had announced a borrowing target of Rs 6.06 lakh crore in the Union Budget for 2018-19. That was after the government had to increase its planned borrowings in 2017-18. The Centre had to kickstart the economy from a three-year low after it was hit by the twin disruptions of demonetisation and a new sales tax regime.

India borrowed Rs 6 lakh crore in 2017-18, which was higher than the Rs 5.8 lakh crore it had planned.

That meant that India missed its target of keeping fiscal deficit at 3.2 percent of the gross domestic product. Jaitley had said that the slippage came as the government collected GST collections for only 11 months. It also delayed India’s ambition of bringing down the deficit to 3 percent by two more years to 2021.

Government securities though may find it hard to get buyers. The top buyer of Centre's bonds – commercial banks and insurers – are flushed with liquidity and have little-to-no appetite. And they've been losing money on their bond portfolios as yields have spiked due to the government's fiscal constraints, a recent bank fraud and a weak rupee.

That means the bond demand dynamics will be largely dependent on what the RBI does and if foreign investors choose to buy, according to research by Japanese brokerage Nomura. "," Nomura said.

The past reliance of Indian bond markets on banks suggest that a new investor class is needed to absorb the upcoming bond supply.

Nomura, Japanese brokerage

Last week, finance ministry officials met primary dealers seeking suggestions for the smooth conduct of the borrowing programme. Primary dealers had recommended the issuance of more securities of short tenures to cut mark to market losses of investors, a government official had told reporters then.

(This article was originally published on BloombergQuint.)