The government will borrow ₹7.5-lakh crore between April 1 and September 30, Finance Ministry said on Thursday.

The interim Budget has set a target of ₹14.13-lakh crore of gross borrowing during FY25 to bridge the deficit between expenditure and Income. This means 53 per cent of the yearly target is to be borrowed during the first half of the current fiscal, which is lower than the previous years’ number of 60 per cent or more.

“The borrowing is slightly less as our effort is to optimism cash balance and reduce the cost of borrowing. We don’t want to hold too much money, if we don’t need it,” Finance Secretary T V Somanathan said, explaining the rationale behind the latest number. It may be noted that the borrowing calendar in not a new policy decision and hence not governed by the Model Code of Conduct. It is an ongoing process in government functioning.

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Commenting on the latest borrowing calendar, Devendra Kumar Pant, Chief Economist with India Ratings & Research (Ind-Ra), said: ”Based on GDP growth performance of FY24 and quarterly momentum, FY25 nominal GDP may exceed Budget Estimate of 10.5 per cent which may lead to higher tax collection and lower borrowing requirement for next fiscal.”

Aditi Nayar, Chief Economist of ICRA, said the sharp 15.5 per cent YoY fall in the government’s gross supply in the first half of FY25, along with the bond index inclusion starting end-June 2024, is expected to augur well for G-sec yields. ”ICRA expects the 10-year yield to trade between 6.8 per cent 7 per cent during H1 FY25,” she said.

First-half borrowing

According to the calendar, first half borrowing through dated securities will include ₹12,000 crore through issuance of Sovereign Green Bonds (SGBs). Based on market feedback and in line with global market practices, it has been decided to introduce a new dated security of 15-year tenor, a Finance Ministry statement said while adding that first half borrowing to be completed through 26 weekly auctions. 

The market borrowing will be spread over 3, 5, 7, 10, 15, 30, 40 and 50-year securities. The share of borrowing (including SGBs) under different maturities will be: 3-year (4.80 per cent), 5-year (9.6 per cent), 7-year (8.80 per cent), 10-year (25.60 per cent), 15-year (13.87 per cent), 30-year (8.93 per cent), 40-year (19.47 per cent) and 50-year (8.93 per cent). “The government will continue to carry out switching of securities to smoothen the redemption profile,” the statement said,

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While long-term borrowing (1 year-50 years) is made through dated securities, there is also provision of Treasury Bills for short-term borrowing (91 days, 182 days and 364 days). Dated securities are issued with an interest rate. Although Treasury Bills do not carry interest rate, they are issued at discount and redeemed at face value.

The government will continue to reserve the right to exercise green-shoe option to retain an additional subscription of up to ₹2,000 crore against each of the securities indicated in the auction notifications. Weekly borrowing through issuance of Treasury Bills in the first quarter (Q1) of FY25 is expected to be ₹27,000 crore for the first seven auctions and ₹22,000 crore for the subsequent six auctions with net borrowing of ₹(-)3,000 crore during the quarter.