In­dia to bor­row $61.4b


In­dia will bor­row a gross Rs3.68 tril­lion ($61.4 bil­lion) in the first half of the fis­cal year that be­gins on April 1, or 61.6 per cent of the full-year tar­get, Arvind Ma­yaram, the coun­try's eco­nomic af­fairs sec­re­tary said on Fri­day. In the in­terim budget un­veiled in Fe­bru­ary, the Congress-led govern­ment had an­nounced it would bor­row Rs5.97 tril­lion ($99.68 bil­lion) via bond sales dur­ing the full fis­cal year end­ing in March 2015.

The first-half bor­row­ing is in line with the coun­try's tra­di­tional prac­tice of rais­ing 60-65 per cent of the bud­geted amount for the full year dur­ing the April-Septem­ber pe­riod. In­dia bor­rowed around 65 per cent of its full year needs dur­ing the first half of 2013/14.

Still, bond in­vestors worry In­dia will be forced to raise its bor­row­ing tar­get for the next fis­cal year re­gard­less of who wins elec­tions con­clud­ing in May, given con­cerns the cur­rent govern­ment's clam­p­down in spend­ing is seen as un­likely to be sus­tained. The op­po­si­tion Bharatiya Janata Party, which is leading in al­most all polls ahead of elec­tions, would also not be bound by the cur­rent govern­ment's bor­row­ing projections and might look to re­vise them in its budget af­ter the elec­tions. "The (first-half bor­row­ing) num­ber is bet­ter than last year," said Manoj Rane, man­ag­ing di­rec­tor and head of fixed in­come and trea­sury at BNP Paribas.

"How­ever, the new govern­ment will have its own budget, and fis­cal deficit (pro­jec­tion) will cer­tainly be higher than 4.1 per cent, which could lead to higher bor­row­ing." While Fi­nance Min­is­ter P. Chi­dambaram has pledged to lower the fis­cal deficit to 4.6 per cent of gross do­mes­tic prod­uct (GDP) this year, be­low the orig­i­nal tar­get of 4.8 per cent, an­a­lysts say the coun­try will do so by ei­ther cut­ting or de­fer­ring sub­stan­tial ex­pen­di­ture.

Ex­pec­ta­tions this spend­ing would need to come back have made mar­kets skep­ti­cal the new govern­ment can meet the cur­rent tar­get of a fis­cal deficit of 4.1 per cent of GDP for 2014/15. In­vestors in In­dia fo­cus on debt bor­row­ing lev­els given their im­por­tance in con­tain­ing the coun­try's fis­cal deficit and help­ing to fi­nance govern­ment spend­ing.

Adding to fis­cal woes is the strug­gle to re­vive Asia's third largest econ­omy, which is grow­ing at around a decade low and led New Delhi to miss tax rev­enue projections for three con­sec­u­tive years. Projections for this year are seen as par­tic­u­larly un­re­al­is­tic, with the govern­ment ex­pect­ing a record growth of 18 per cent in tax rev­enue. The govern­ment will bor­row Rs680 bil­lion each in April and May from mar­kets, and it can bor­row up to Rs350 bil­lion from the Re­serve Bank of In­dia in short-term debt dur­ing AprilSeptem­ber, fi­nance min­istry of­fi­cials fa­mil­iar with budget said. Mean­while, Ma­yaram spec­i­fied the govern­ment will also bor­row Rs400 bil­lion through trea­sury bills in AprilJune, Ma­yaram said.

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