New Delhi: The government on Friday said it would borrow 60% of its full 2011-12 year borrowing target of Rs4.17 trillion ($93 billion) by end-September, slightly below market expectations, sending bond yields down.
The government will issue Rs2.5 trillion ($56 billion)of debt between 1 April and 30 September, the first half of its next fiscal year, economic affairs secretary R. Gopalan said on Friday.
The government normally borrows the majority of its full-year target during the first half of the fiscal year, so as not to crowd out debt issuance by industries which typically raise money for investment and expansion during the second half.
Analysts had expected the April-September borrowing figure to be around 60-65% of the total planned borrowing, in line with the government’s past practice of front-loading.
“Our economy is growing and our own requirement in absolute terms is the same, which means that in percentage terms it is less. So, there is free space for private sector to access the market,” Gopalan told reporters.
A finance ministry source said the average weekly borrowing would be Rs10,000 crore-12,000 crore and issuances would be a mix of medium-and long-term tenors.
The borrowing will help plug India’s targeted fiscal deficit of 4.6% of GDP in the next fiscal year, which is narrower than the current year’s 5.1%.
The Reserve Bank of India (RBI) has said that managing the full-year borrowing target would not be a challenge.
On Friday, central bank deputy governor Shyamala Gopinath said the RBI could purchase bonds from the secondary market if needed to infuse liquidity into the banking system.
The RBI had bought Rs37,068 crore worth of bonds through open market operations (OMO) between December and January, out of a total commitment of Rs48,000 crore.
The central bank has said it wants liquidity to be at plus or minus 1% of total bank deposits.
“We can use any measure to achieve that and OMO is one of them,” Gopinath said.
At 12:20 pm, the yield on the most traded 8.13% 2022 government bond fell 4 basis points to 8.03%. The benchmark five-year swap rate was down 2 basis points to 7.99%.
The one-year swap rate fell 2 basis points to 7.43%.
“The market seems happy about the slightly lower-than-expected borrowing in the first half along with the assurance of open market operations if needed,” said Bekxy Kuriakose, head of fixed income at L&T Investment Management.