Govt plans to borrow `7.5 lk cr from market via bonds in H1 FY25

THE CENTRE is planning to raise Rs 7.5 lakh crore through market borrowing in the first half (Aprilseptember) of 2024-25. The borrowing includes Rs 67,000 crore via the 50-year securities that debuted in the second half of the current fiscal, the finance ministry said on Wednesday.

The sc he du ledh1borro wings will be 53.1 per cent of the gross market borrowing of Rs 14.13 lakh crore estimated for 2024-25, and came in below analysts’ expectations. The budgeted borrowings for the current year, bucking trend, was lower than the estimate of Rs 15.43 lakh crore for the current year, and marked the robustness of fiscal consolidation.

The 10-year benchmark bond yield ended 7.07 per cent on Wednesday from 7.09 per cent in the previous session.

“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. As hitherto, all the auctions covered by the calendar will have the facility of non-competitive bidding scheme under which 5 per cent of the notified amount will be reserved for the specified retail investors,” the ministry said in a statement.

“The sharp 15.5 per cent y-oy fall in the Centre’s gross supply in H1FY25, along with the bond index inclusion starting June-end 2024, is expected to aug ur well for G-sec yields,” wrote Aditi Nayar, chief economist and head, research and outreach, Icra. It expects the 10-year yield to trade between 6.8-7 per cent during the first half of the next fiscal.

The latest calendar implies that the Centre’s borrowings in FY25 would be relatively more back-ended, with 46.9 per cent of the gross issuances scheduled for H2. In the current year, only 42.4 per cent of the issuances are slate dforh2.t his also signals the Narendra Modi government’s plan to ramp up capex after the final Budget and the monsoons, if voted back to power for a third term. “Although we foresee a shallow rate cut cycle limited to 50 bps commencing from October 2024, any delay in the same could push up the 10-year G-sec yield to over 7.0 per cent in the second half of the fiscal, amid compressed term spreads,” Nayar added.

Presenting the interim Budget on February 1, finance minister Nirmala Sitharaman said: “The gross and net market borrowings through dated securities during 2024-25 are estimated at Rs 14.13 lakh crore and Rs 11.75 lakh crore, respectively... Both will be less than that in 2023-24. Now that private investments are happening at scale, the lower borrowings by the central government will facilitate larger availability of credit for the private sector."

While the jury is still out among independent analysts, the government has been maintaining that private investments are picking up, aided by the crowdin effect of high public capex. Against the estimate of Rs 10 trillion for 2023-24, the government has earmarked Rs 11.11 lakh crore as capex for the next financial year.