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With bond yields hardening, the Centre has decided to raise a gross ₹ 2.88 lakh crore from market borrowings in the first half of the fiscal.
It has also chosen to introduce shorter duration government securities and will also an additional ₹ 25,000 crore from the National Small Savings Fund against the Budgeted ₹ 75,000 crore to cut down its requirement for fund raising.
In 2018-19, the buyback of government securities (G-Sec) would also be reduced by ₹ 25,000 crore
In effect, this will mean that the Centre’s borrowing will be lower than the Budgeted gross market borrowing for 2018-19 of ₹ 6.06 lakh crore. The net market borrowing is pegged at ₹ 4.62 lakh crore.
“The objectives of this move are multiple. We want to lower the loan on market borrowings as we have equally effective means available. Many other measures like the lower tenor bucket will meet the demand and have a soothing effect,” Economic Affairs Secretary Subhash Chandra Garg told reporters.
Garg along with his team met officials from the Reserve Bank of India (RBI) to finalise the Centre’s borrowing calendar for April to September 2018.
The Economic Affairs Secretary also said that the RBI is expected to pay additional dividend this week. “It should come in the next few days before March 31,” he said.
He also said that the interest rate on small savings in the first quarter of the new fiscal starting April 1 is unlikely to increase.
Garg also said the government and RBI are in the final stage of discussions for increasing FPI limits from April 1, 2018. “An announcement is likely in the first week of April,” he said.
Borrowing
“The gross borrowing in the first half makes up only 47.5 per cent of the Budget Estimate as against 60 per cent 65 per cent share in this period in previous years,” said the Finance Ministry in a release.
In the first half of 2017-18, the Centre’s gross market borrowing was higher at ₹ 3.72 lakh crore.
Meeting the demand of market participants for shorter duration G-Secs, the government will also introduce issuance of bonds in one-to four year bucket from April 1 and will reduce the issuance of 10- year paper. ( See Chart )
“The Government will introduce two benchmarks during this half year - two-year and five-year - to meet the market demand. More issuance will be planned in short and long-term maturity bucket, reducing the issuance in medium term segments of 10 year to 14 year,” said the Ministry.
Additionally, it also to issue more Floating Rate Bonds (FRBs) and introduce CPI linked bonds, both put together, to the extent of 10 per cent of issuances during the year.
In total, there will be 24 issuances of G-Secs in the first half of the fiscal of ₹12,000 crore each.
The Centre’s Treasury Bill (T-Bill) programme for the first quarter is to raise ₹ 1,95,000 crore. During this period, T Bills of ₹ 1,53,000 crore will expire. The gross borrowing per week under T-Bills will be ₹ 15,000 crore.
Expressing confidence that the Centre will meet the targeted fiscal deficit of 3.3 per cent of the GDP, Garg said the Centre’s Ways and Means Advance in the first half of 2018-19 has been kept at the same level as this fiscal. Additionally, the Budget has a provision of cash management bills of ₹ 1 lakh crore
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