The scaled-down target and and less-than-usual frontloading of borrowing in the first half are aimed at calming the bond market amid headwinds stemming from the West Asian war, experts said.
It will also leave the government with greater space to calibrate its borrowing plan for the second half of 2026-27 once uncertainties around the war ease, they added.
The government had budgeted a gross market borrowing target of ₹17.2 lakh crore for FY27.
In the first half of the current fiscal, the government had borrowed a tad over 54% of its estimated annual mop-up of ₹14.6 lakh crore to frontload expenditure.
“Since the budget presentation, switches of government securities were conducted, reducing gross market borrowing to ₹16.09 lakh crore,” the finance ministry said in a statement. It plans to borrow ₹15,000 crore through green bonds in the first half. The yield on the benchmark 10-year government securities settled at 6.94% on Friday–the highest level for a benchmark 10-year note since July 25, 2024, and up 26 basis points over the past one month–mainly due to the war in West Asia. “The borrowing programme for the first half of 2026-27 is less front-loaded than that seen in recent years, which may help to cool the recent spike in yields,” said Aditi Nayar, chief economist at ICRA. This is accompanied by a rise in the Ways and Means Advances (WMA) limit. “Yields would likely ease once the West Asia conflict resolves, and it would be prudent to defer some borrowings until then, although the timelines for the same remain uncertain,” Nayar said.
India Ratings chief economist DK Pant said, “It’s a judicious decision to cut the borrowing plan when the yields are high and recalibrate it later once the West Asian war situation improves.” The borrowing in the first half is proposed to be over in 26 weekly tranches of ₹28,000-34,000 crore each, the ministry said.Long-tenor bond share cut
The Centre has reduced the share of its long-tenor securities. The share of borrowing under different maturities will be as follows: three-year maturity (8.1%), five-year (15.4%), seven-year (8.1%), 10-year (29%), 15-year (14.5%), 30-year (7.3%), 40-year (8%) and 50-year (9.6%).