‘Govt likely to keep FY10 borrowing target’

‘Govt likely to keep FY10 borrowing target’

New Delhi: India’s borrowing target for 2009-10 is likely to remain unchanged, a finance ministry official said on Tuesday, ahead of a meeting to finalize the borrowing calendar for the second half.

The comment helped reinforce market expectations and the 10-year benchmark bond yield was largely unchanged at 7.14% from beforehand but off 7.17% at the previous close.

A meeting between Reserve Bank of India (RBI) and finance ministry officials is scheduled at 3 pm (local time) to finalize the borrowing calendar for October-March.

The government had pencilled borrowings of Rs4.51 trillion ($93.6 billion) for the full year and sold Rs2.95 trillion of bonds in April-September.

The initial borrowing target for the first half was 2.99 trillion, but the central bank cancelled an auction for Rs12,000 crore in early August without giving any reasons, but was seen to have been caused by poor demand.

The government later adjusted Rs8,000 crore through two auctions, and the remaining 4,000 crore will likely be sold in the second half.

Although the market has been expecting no change in the total borrowing, there are worries about erratic rains and an expected drop in farm output that could push up market borrowing.

“The monsoon deficit is a concern to the government’s borrowing programme.

As of today, we don’t know how the rabi crop (winter-sown) is going to perform," said Rupa Rege Nitsure, chief economist at Bank of Baroda.

She said the borrowing is unlikely to be increased if the production makes up for a lower summer-sown output.

The finance ministry official, who spoke to reporters on condition he not be named, also said the fiscal deficit target of 6.8% of gross domestic product would not be exceeded.

Nitsure said tax revenue should improve on the back of an economic revival, while a surging stock market will help the government push divestments.

“The only uncertainty is on the agriculture front. It’s a 50-50 situation at the moment, the picture will be clearer only after December," she said.