Rising interest rates may be burning a hole in your pocket, but the Government has little reason to complain.

The Government, which has borrowed close to Rs 445,000 crore through bond issues so far this year (as of November 30), saw the average cost of borrowings fall by 100 basis points from last year. Despite a sharp spike in yields on the 10-year G-Sec since July, the weighted average cost of Government borrowings is 8.28 per cent till date. It was 8.4 per cent during the same period last year.

Cushion to continue A closer look at the pattern of borrowings shows that, by mid-July, the Government had already borrowed a third of its full year’s target — at an average cost of 7.4 per cent. Contrast this with last year, when it paid 8.6 per cent for the same period.

In the 2013 Budget, the Government estimated its gross borrowings at Rs 629,000 crore for 2013-14, up 13 per cent from the previous year. It has so far exhausted 73 per cent of this limit. By this time last year, the Government had completed 90 per cent of its full year’s requirements. But with yields spiking to 9 per cent, and almost a quarter of borrowings yet to be done, will the Government end up paying more than last year?

Not likely. Even after assuming an average borrowing cost of 8.8-9 per cent for the remaining amount, the total cost for the full year comes to 8.36 per cent, which is the same as last year’s.

Compare this with the rates that you pay as a retail borrower. The base rate (benchmark lending rate) for leading banks is close to 10 per cent, the peak of the earlier cycle in 2011. So, home loan borrowers only had a very short spell of respite in the last one year. As per the latest RBI bulletin, the weighted average lending rate for all banks stood at 12.15 per cent.

> radhika.merwin@thehindu.co.in

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