Home / Economy / Govt may stick to or cut its borrowing target on robust revenue

India may keep its market borrowing plan for the financial year intact, with a recent uptick in revenues likely to lead to a discussion on whether the target can be reduced, according to people familiar with the matter.

The government may stick to its borrowing target of 14.3 trillion rupees ($179 billion) for the year to March 2023, while there is a chance it might get lowered given the rise in revenues, the people said, asking not to be identified as the discussions are private.

A decision would be taken later this month when finance ministry officials hold consultations with the Reserve Bank of India to decide on the borrowing calendar for October-March, which would also include the plan for the country’s first sovereign green bond issuance, they added.

India’s tax revenues are growing at a healthy pace, driven by domestic consumption after a wider reopening of the economy from pandemic curbs. Net direct tax collections until mid-September rose 23% from a year earlier, while the mop-up from goods and services tax during April to August was 33% higher than the year-ago period. That’s easing pressure on federal finances at a time the government had to provide additional resources for food and fertilizer subsidies.  

“In case there is lower borrowing than planned in the second half of the year, it will be a big relief and a surprise for the market," said Ritesh Bhusari, deputy general manager for treasury at South Indian Bank. Benchmark 10-year bond yields traded steady at 7.24% Tuesday. 

A finance ministry spokesman didn’t respond to calls seeking comment. An RBI spokesman wasn’t immediately available for comment. After letting the budget deficit balloon to a record high in the pandemic year, the government is planning to narrow it to 6.4% of the gross domestic product in the year to March 2023.

Demand for Indian debt has been more robust than many traders expected in the face of a record borrowing program, helped by speculation over their potential inclusion in global indexes, and record buying by banks. If policymakers trim the planned borrowing amount for the second half of the fiscal year, it will improve the outlook from the supply side as well.

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