The central government on Monday said it will borrow a lower amount via bonds in the first half of 2018-19 compared to the budgeted amount.
The finance ministry while unveiling the borrowing calendar for the April-September period said that it will raise a total of Rs 2.88 lakh crore through the benchmark bond scheme in the first half of the next fiscal.
"The government plans to borrow Rs 2.88 lakh crore (47.5%) in the first half of 2018-19 as compared to Rs 3.72 lakh crore (60-65%) during the same period in the previous year," Department of Economic Affairs (DEA) Secretary Subhash Chandra Garg told reporters. There will be 24 issuances of Rs 12,000 crore each during this period, he said.
The government plans to borrow Rs 50,000 crore less than Rs 6.05 lakh crore proposed in the Budget owing to the "efficient cash management".
It said it intends to use larger inflows from small savings schemes to fund the fiscal deficit. It said it will borrow Rs 25,000 crore more from National Small Savings Fund (NSSF) against the budgeted figure of Rs 75,000 crore. Also, it will reduce the buyback of bonds by Rs 25,000 crore.
The finance ministry also announced that inflation indexed bonds linked to consumer price linked index (CPI) inflation will be introduced next fiscal. Also, more floating rate bonds (FRBs) will be issued. The government also plans to increase the Foreign Portfolio Investment (FPI) limit in the government bonds from next year. "The government is in the final stage of discussions with the Reserve Bank of India (RBI) to increase the FPI limit from 1 April," Garg said.
Meanwhile, the government has decided to issue shorter duration bonds to cater to the market demand. "New benchmarks of two-year and five-year will be introduced during the first half year," Garg said. The government also plans to issue more short-term and long-term bonds, while cutting down on the medium-term segment of 10-14 years. As per the break-up of the borrowings provided by the finance ministry for the first half of 2018-19, 8.3% will be in 1-4 year bucket, 25% in 5-9 year bucket, 29.2% in 10-14 year bucket and 14.6% in 15-19 year bucket. The 20 years plus bucket will account for 22.9% of the borrowing.
"The market borrowing calendar for H1FY19 marks a departure from the front-loading seen in the recent years. This, in conjunction with the change in the proportion of issuance in various maturity buckets, should help to cool the benchmark 10-year yield to an extent," Aditi Nayar, principal economist at Icra, said.
The government's T Bill programme for the first quarter is to raise Rs 1.95 lakh crore. During this period, the government says, T Bills of Rs 1.53 lakh crore will expire. The gross borrowing per week under T-Bills will be Rs 15,000 crore. There will be 13 issuances during the April-June quarter.
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It said it intends to use larger inflows from small savings schemes to fund the fiscal deficit. It said it will borrow Rs 25,000 crore more from National Small Savings Fund (NSSF) against the budgeted figure of Rs 75,000 crore. Also, it will reduce the buyback of bonds by Rs 25,000 crore.
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