Budget 2024: Centre lowers net market borrowing estimate to ₹11.63 trillion

Finance minister Nirmala Sitharaman has lowered her estimate on the government's gross market borrowing in 2024-25 to ₹14.01 trillion, down from the ₹14.13 trillion projected in the interim budget, reflecting a firmer move aimed at fiscal prudence.

Net market borrowing has been adjusted to ₹11.63 trillion from the previously stated ₹11.75 trillion, Sitharaman said while announcing the Union Budget for 2024-25 on Tuesday.

In FY24, the Centre had borrowed a record ₹15.43 trillion on a gross basis and ₹11.80 trillion on a net basis. 

The reduction in borrowing aligns with the downward revision in the fiscal deficit target. The government uses funds from the debt capital market, raised via government bonds or securities, to cover its budget shortfall.

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Following the announcement of the revised fiscal deficit, government bond yields initially fell but later pared some losses as the reduction in market borrowing was less than anticipated. 

The benchmark 10-year bond yield dropped to an intraday low of 6.9260%, the lowest since April 2022, before recovering to 6.9687%. This compared with 6.9588% prior to the budget presentation and 6.9633% at Monday’s close.

The fiscal deficit for FY25 is set at 4.9%, an improvement from the 5.1% target announced in the Interim Budget of February 2024. Total receipts, excluding borrowings, are estimated at ₹32.07 trillion, while total expenditure is projected at ₹48.21 trillion. Net tax receipts are anticipated to be ₹25.83 trillion.

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“The fiscal consolidation path announced by me in 2021 has served our economy very well, and we aim to reach a deficit below 4.5% next year. The Government is committed to staying the course. From FY27 onwards, our endeavour will be to keep the fiscal deficit each year such that the Central Government debt will be on a declining path as a percentage of GDP,” Sitharaman stated.

India’s government bonds have garnered significant attention this financial year due to their inclusion in JPMorgan's Emerging Market Debt Index, effective July 2024. Foreign portfolio investors (FPIs) are estimated to have purchased Indian bonds worth $8 billion net so far in 2024.