Centre to raise 64% of borrowing in first half

The government would mop up a little more than 64 per cent of its 2017-18 borrowing in the first half of the fiscal year, Economic Affairs Secretary Shaktikanta Das told reporters on Tuesday.

However, the maturity period of the bonds will increase. Now the average maturity period of government bonds is about 10.5 years. The government would auction bonds next year with an average maturity period of 14.7 years, Das said. The details of the borrowing were subsequently released on the Reserve Bank of India (RBI) website.

The gross borrowing for 2017-18 is ~5.8 lakh crore and the net borrowing, after considering buybacks of ~75,000 crore, would be ~4.25 lakh crore. About ~3.72 lakh crore of the gross borrowing, or roughly 64.13 per cent, would take place by September.

Generally, the government borrows 60-62 per cent of the total in the first half so that the second half is left for private companies to get their funds. Otherwise, government borrowing crowds out the private sector.

However, the slightly increased borrowing would not put pressure on the market as 90 per cent of the redemption of ~1.5 lakh crore due in 2017-18 would happen in the first half itself, Das said.

“Secondly, the Budget for next year has been fully passed and therefore the entire expenditure is approved in the Budget and is available to various ministries to spend from April 1. Therefore, money will be available fully from the beginning of the year,” Das said.

The auction calendar showed that here would be 24 auctions in the first half, most of them having a size of ~15,000 crore. There will be four auctions worth ~18,000 crore each. However, the maturity period of the bonds will increase. Now the average maturity period of government bonds is about 10.5 years. The government would auction bonds next year with an average maturity period of 14.7 years, Das said.

The borrowing calendar, released on the RBI website, showed a lot of bonds would be issued with a maturity period of 20 years and above. Earlier, these long-tenure bonds were issued sparingly. The bond with the longest maturity period in the market is a 40-year-old one, issued first in October 2015.

“The focus in planning the open market borrowing is to elongate the maturity profile and also to undertake it in the most non-disruptive manner,” Das said.

A longer-maturity period helps the market to create a longer-tenure benchmark and helps the government to plan its finances better. The firstquarter borrowing through short-term treasury bills, which mature in one year, will be ~26,000 crore.