New Delhi: The government’s decision to sell Rsl5,000 crore ($2.85 billion) of bonds on 30 December in an unscheduled auction will not increase its overall market borrowing for the second half of this fiscal year, a senior government official with direct knowledge of the matter told Reuters on Monday.
The official, who declined to be named, said the government is still to decide whether to announce additional market borrowing in the second half of the fiscal year that ends in March 2012.
New Delhi on Monday said it will sell Rsl5,000 crore of bonds on 30 December in an unscheduled auction to partially offset a Rs4,000 crore auction cancelled last month and to fund an “emerging cash requirement”.
“This is part of H2 borrowing. This doesn’t change the overall borrowing figure,” the official said late on Monday.
“We have not yet taken any decision on additional borrowing,” the official said.
Weak tax revenue receipts amid slowing economic growth have sparked concerns that the government fiscal deficit could miss the budgeted target and reach 5.5% of GDP in the current fiscal year, forcing the government to borrow Rs35,300 crore more from the market, a Reuters poll last month found.
Worries over India’s public finances pushed up the government 10-year bond yield on Monday to more than a one-week high of 8.50%, a level last seen on 16 December, before ending at 8.49%. It had closed at 8.37% on Friday.
“We won’t look at the bond yields to decide on borrowing. If we have a requirement, we will borrow,” the official said.
In the first seven months of the fiscal year, New Delhi’s net tax revenue grew just 7.3% from a year earlier against a budgeted rise of about 18% for the full year. Expenditure during the seven months rose about 10%, well above the 3.4% rise pencilled in.
“This is a bad year. Quite clearly tax revenue is under stress,” the official said.
Dealers have said the 10-year bond yield could climb as high as 8.55% if an additional borrowing announcement is made, although some of that expectation has already been priced in.
Bond yields jumped to near two-month highs in late September when the government announced higher-then-expected borrowing for the second half of the fiscal year ending in March.