The Central government will raise 8.20 trillion rupees ($86.38 billion) through bonds between April and September, amounting to 51% of its annual borrowing plan, the finance ministry said on Friday.
The share is slightly lower than market expectations, as traders had anticipated borrowing to be between 53% and 56% in the first half of the fiscal year starting April 1.
The borrowing programme is also less front-loaded compared to recent years, which could help ease pressure on bond yields that have risen sharply in recent weeks.
Shift away from ultra-long bonds
Borrowing through ultra-long bonds of 30-to-50-year duration will be lowered to 24.9%, down from 35% in April-September 2025 and 30% in October-March.
At the same time, the government has increased the share of benchmark 10-year bonds to 29% from 26.2% last year, and raised the auction size for these papers to 340 billion rupees from 320 billion rupees.
The government will issue bonds across maturities of three, five, seven, 10, 15, 30, 40 and 50 years, along with 150 billion rupees worth of green bonds.
Borrowing target revised lower after switches
In the February budget, the government had set its full-year gross borrowing at a record 17.20 trillion rupees. However, multiple bond switch operations have since reduced this to 16.09 trillion rupees. New Delhi had borrowed 54% of its fiscal 2026 borrowing in the first half of the year, making the current plan slightly more balanced.
Market pressure from global and domestic factors
Indian bonds, stocks and the rupee have come under pressure over the past month due to the Iran war and rising energy costs, which have worsened growth and inflation expectations.
The 10-year bond yield rose to a 20-month high of 6.95%, while the rupee weakened past 94 against the dollar for the first time.
“Yields would likely ease once the West Asia conflict resolves, and it would be prudent to defer some borrowings until then,” said Aditi Nayar, chief economist at ICRA to Reuters.
Record borrowing plan still in focus
The government plans to borrow 17.2 trillion rupees in the full fiscal year starting April 1, an increase of about 18% from the current year’s revised estimate.
Higher supply of bonds, along with softer demand from pension and insurance funds, could keep pressure on yields. Rising costs may also strain the economy, which is dealing with external challenges like US tariffs. The fiscal deficit is projected at 4.3% of GDP for the next year, compared to 4.4% in the current year.
“The pace of fiscal consolidation is quite modest, as the government may be running out of space to curb spending,” said Abhishek Upadhyay, economist at ICICI Securities Primary Dealership Ltd to Reuters.
Liquidity concerns and RBI support
Net borrowing for the next fiscal year is estimated at 11.7 trillion rupees, slightly higher than the current year’s revised 11.3 trillion rupees. Redemptions are expected to rise sharply to about 5.5 trillion rupees, nearly 70% higher than last year. Meanwhile, liquidity in the banking system has tightened due to the Reserve Bank of India’s interventions in the foreign exchange market to support the rupee.
To manage this, the central bank has increased bond purchases to inject liquidity. “Active liquidity management will be required, or the path of least resistance is only upwards for yields,” said Alok Sharma, head of treasury at Industrial and Commercial Bank of China in Mumbai to Reuters.