India keeps size of annual borrowing

India kept its full-year borrowing plan unchanged as revenues improve, a move that will cheer traders hit by rising US yields.

The administration will borrow Rs12.05 trillion ($163 billion) in the year through March, the finance ministry said in a statement Monday. Finance Minister Nirmala Sitharaman had earlier indicated that the government may borrow about Rs1.6 trillion extra, and that led to traders expecting higher sales for the second half.

The news may support the domestic bond market weighed down by the recent surge in US Treasury yields. Traders’ focus will now shift to a key index review by FTSE Russell for the nation’s bonds on Thursday and any potential inclusion will trigger a rally.

“The market would be quite relieved that the government is not changing its borrowing program,” said Harish Agarwal, fixedincome trader at FirstRand Bank. “It will definitely have some positive impact, with US Treasury yields touching 1.5 per cent, which is negative for the market.”

The government plans to sell Rs5.03 trillion of bonds in the six months to March, compared with an earlier plan of Rs4.8 trillion. First half borrowings were Rs7.02 trillion, compared with Rs7.24 trillion planned, according to the statement. The second-half borrowing will factor in compensating states for a revenue shortfall caused by the pandemic.

Bonds

About 16 per cent of the second-half borrowing is via below 10-year bonds, while the rest is spread among 10-year and above papers, the statement said.

Finance Minister Nirmala Sitharaman said in May that the government will borrow about 1.6 trillion rupees additional on behalf of states to compensate them for the shortfall in the goods and services tax revenues. Instead of extra borrowings, the central government passed 750 billion rupees from their own borrowings due to improved revenues in the first half. India’s net direct collections jumped by 74 per cent to Rs5.7 trillion as on September 22.