The Centre will raise Rs 8.88 trillion in the first half of the financial year 2023-24, about 57.5% of its gross borrowing target for the year. The borrowing size for the first half compared to the annual target is lower than in 2021-22 (62%) and 2022-23 (59%), as the government sought to prevent a sharp year-on-year rise in net borrowings, given the scheduled fall in redemptions in the first half and a spike in the second. The Centre hopes to rein in borrowing costs and seeks to ensure that the private sector is not crowded out.
The sovereign green bonds for next fiscal will be issued in the second half, the finance ministry said on Wednesday.
Bond yields have been rising in recent weeks in anticipation of the government’s borrowing calendar. However, the 10-year benchmark government bond yield ended at 7.2897% on Wednesday, marking its lowest level in two months as mutual funds are seen to have stepped up purchases ahead of the tax changes from April 1.
“The H1 gross borrowing is less front-ended than earlier years given the spike in redemptions in H2. With this the net borrowing will be less unevenly split between the two halves,” said Aditi Nayar, chief economist and Head-Research & Outreach, ICRA.
According to the indicative calendar for issuance of government dated securities for the first half of the fiscal year 2023-24, the Reserve Bank of India will conduct weekly auctions for amounts between
31,000 crore,33,000 crore and Rs 39,000 crore between April 1 and September 30 this year. The borrowing will be completed in 26 weekly tranches.
“The government of India, in consultation with the Reserve Bank of India, reserves the right to exercise the green-shoe option to retain additional subscription up to `2,000 crore against each of the securities indicated in auction notification,” the ministry said in the statement.
Like in the past, the Centre and RBI will continue to have the flexibilty to bring about modifications in the calendar in terms of notified amount, issuance period, maturities and to issue different types of instruments, including instruments having non-standard maturity, floating rate bonds (FRBs), CPI linked inflation indexed bonds (IIBs) depending upon the requirement of the government, evolving market conditions and other relevant factors, after giving due notice to the market, it further said.
The RBI will also be conducting switches of dated securities through auction on third Monday of every month or at more frequent intervals.
For the first quarter of the fiscal, the RBI will auction
32,000 crore of treasury bills every week, amounting to4.16 trillion.
For fiscal year 2023-24, the Union Budget has pegged the Centre’s gross borrowing from dated securities at
15.43 trillion, which is about 8.6% higher than14.21 trillion estimated for the current fiscal.
Net borrowings from dated securities is pegged at
11.8 trillion in the next fiscal, as against11.08 trillion this fiscal.
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.
Goldman Sachs has projected the states’ aggregate market borrowing to rise 14% on year to Rs 8 trillion in FY24. State governments’ securities (SGS) issuances are usually lower than their budget targets in recent years as these are influenced by factors such as central tax devolutions and grants.