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Centre maintains H2FY15 borrowing target of Rs 2.4 lakh cr

There will be a marginal cut in borrowing to meet the fiscal deficit target of 4.1 percent of GDP

The government has released its borrowing calender for the second half of this fiscal. The Centre will borrow Rs 2.4 lakh crore against the Budget estimates of Rs 2.48 lakh crore, which is pretty much on target. According to sources, there will be a marginal cut in borrowing to meet the fiscal deficit target of 4.1 percent of GDP.

Addressing the media, Finance Secretary Arvind Mayaram said that there will be no additional borrowing via T-bills in Q3 and that the average weekly borrowing will be at Rs 14,000-15,000 crore in H2FY15. He said the government will undertake substantial switches or buybacks of bonds for better debt management. He expects the FY15 growth in the range of 5.7-5.9 percent.

“Borrowing calendar for the second half of this fiscal was finalised for total borrowing of Rs 2,40,000 crore. Total borrowing for the year has been revised to Rs 5,92000 crore,” he said.

What it means

The good news here is the government has been borrowing Rs 8000 crore less. It borrowed Rs 16000 crore less in the first half mainly on the back of surplus money from tax collections. It was expected that the extra Rs 16000 crore will be loaded on in the second half but they have increased it only by Rs 8000 crore, which means overall for the year it is still Rs 8000 crore less.

Market impact

The markets rallied on Friday on S&P’s credit outlook upgrade on India, with the Sensex climbing 158 points and Nifty ending 57 points up, managing to hold the important support level of 7850. Thus, there won’t be much space for the markets to move up on Monday.

The yields fell from 8.47 percent to about 8.44 percent. So, it is a little difficult to find more reasons to increase bond prices or allow yields to fall. Also, Tuesday is the RBI’s credit policy, which is another reason why the bond markets will not want to react too gung-ho. Yet the yields may open at least 1 basis point lower when they start trading on Monday.

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