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.