The borrowing plan will make sure rates are competitive and the market is not “disturbed,” Economic Affairs Secretary Anuradha Thakur told Reuters in an interview on Tuesday.
“Healthy markets are equally important for us,” she said, adding that uncertainty around the U.S.-India trade deal has ended, lifting investor sentiment.
With the deal in place, “foreign portfolio investment sentiment will change…and the rupee has also started appreciating.”
India’s bond markets have been battered by hefty government borrowings, with investors expecting a record 30 trillion rupees ($331.81 billion) of federal and state government debt supply in the next fiscal, at a time when the central bank’s rate-cutting cycle is nearing its end.
Government bond yields determine the cost of borrowing for firms and households.
New Delhi plans to borrow a record 17.2 trillion rupees in 2026-27, Finance Minister Nirmala Sitharaman said in her budget speech on Sunday, about 17% higher than the current fiscal’s 14.61 trillion rupees.The benchmark 10-year bond yield jumped to a one-year high on budget day, but dipped a day later after the announcement of the trade deal.
The government’s net borrowing, which excludes repayments for past debt, will rise to 11.73 trillion rupees in the next fiscal from 11.33 trillion rupees for the current year.
The borrowing calendar, managed by the central bank, will use a mix of switches, buybacks and open market operations to repay past debt of 5.5 trillion rupees, balancing market developments with lower borrowing costs, Thakur said.
New Delhi typically conducts bond switches and buybacks to lower the supply of debt to the market.
The Reserve Bank of India, which sets the supply of money in the economy, buys or sells bonds through open market operations to influence banking system liquidity. It is the debt manager for the government.
India has set a 2.5 trillion-rupee target for bond switches in 2026-27, while not specifying any buyback goal.