India likely to keep April-Sept borrowing under 60% of FY24 goal, sources say

The Indian government’s borrowing for April-September is likely to be between 55% and 58% of its gross borrowing target for next fiscal year, two government officials said on Wednesday, to front-load expenditure and keep bond supply closer to market expectations.

India aims to raise 15.43 trillion rupees ($187.18 billion) from the market in the financial year starting April 1, higher than the 14.21 trillion rupees it raised this year.

“The government is planning to keep its borrowing (at) 55%-58% in the first half of the year. A final decision would be taken after consulting with the Reserve Bank of India (RBI) on March 27,” said one of the officials.

The officials did not want to be named as they are not authorised to speak to the media. A finance ministry spokesperson did not immediately reply to a Reuters email seeking comment.

The government borrowed 58% of its full-year target in the first half of this financial year.

However, market participants want that to be reduced to 55% of this year’s target, with a higher share of longer-tenor paper, given the sizeable maturities due in October-March.

Bonds worth 1.59 trillion rupees are due to mature in the first half of next financial year and 2.81 trillion rupees in the second. The government also plans to conduct Treasury bill issuances in an orderly manner next fiscal year, another official said.

This comes after the government unexpectedly raised its borrowing by 500 billion rupees via these ultra-short-term instruments this month.

The higher supply, along with a drop in the banking system liquidity, saw the 364-day yield rise above the 10-year bond yield last week, prompting the government to consider remedial measures, Reuters reported.

The officials also said the government was not keen to launch a new 20- or 50-year bond, as some market participants expect, as the former would dent demand in the 14-year segment and there are few takers, apart from some insurers, for the latter.

The government and the RBI will also discuss issuing green bonds, although the timing may not be appropriate given foreign investors have turned jittery after the failure of Silicon Valley Bank, the first official said.

The government raised 160 billion rupees this year through green bonds but announced no plans for such issuances for this year in the 2023/24 budget.