Borrowing calendar for H1FY24: Decision on March 27

The finance ministry and the Reserve Bank of India will likely finalise the borrowing calendar for the first half (H1) of 2023-24 on March 27.

In the Budget for FY24, the Centre has estimated its gross market borrowings to increase by 8.6% to Rs 15.43 trillion in FY24, in line with market expectations.

Like in the past few years, the Centre might borrow 60% of its borrowing target in H1 of the next financial year as the states usually borrow a larger part of their requirement in the H2. However, a final call on the ratio of borrowing would be taken in the meeting, an official said.

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The government hopes to rein in its market borrowing costs in the next financial year as inflation is expected to moderate even as its borrowing strategy will ensure that the private sector is not crowded out.

The Centre’s borrowing plan for FY24 includes the entire market funding requirement of the railways, the National Highways Authority of India and the Rs 1.3 trillion capex support to states.

The increase in borrowing in FY24 was lower than the projected 10.5% nominal GDP growth and has been designed to ensure that the interest cost comes into control.

This assumes importance as the interest payments are budgeted to rise by 14.8% to Rs 10.8 trillion in FY24 budget estimate (BE), accounting for 24% of total expenditure indicated for the fiscal. Given the sizeable increase in the Centre’s debt outstanding since the onset of the Covid-19 pandemic, analysts reckon there is a need to limit borrowings.

The share of net market borrowings and NSSF in financing the fiscal deficit is at 66.1% and 26.4%, in budget estimates of FY24, compared with 63.1% and 25% respectively, in the revised estimates of FY23.

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The 10-year benchmark government bond (G-sec) yield tightened 5 bps to 7.4% in the last month as risks to inflation remained elevated.

As core inflation remains stubbornly high and the likelihood of a rate hike by the central bank increases, upward pressure on G-Secs yields will continue, Care Ratings said in a note. “We see the 10-year bond yield trading within the 7.4-7.5% range over the next couple of months before easing towards 7.3% in H1 FY24. Further easing of bond yields to the 7-7.2% range could be expected in H2 FY24 as domestic inflation cools, and global tightening of monetary policy comes to a halt,” the rating agency said.