The Centre will raise Rs 8 lakh crore or 54% of the annual gross borrowing target of Rs 14.82 lakh crore from the market in the first six months of 2025-26, including Rs 10,000 crore to be mopped up through sovereign green bonds. The size of H1 borrowings is marginally lower than market expectations of 56-59% of annual goal and might keep benchmark yield in check.
The borrowing schedule is calibrated keeping in mind in actual spending requirements, as the government is keen to achieve optimal savings in interest costs, official sources said.
The Budget FY26 had placed fiscal deficit estimate for the current fiscal year at 4.8%, and set a target to reduce it to 4.4% in the next financial year. Gross market borrowings are estimated grow just 6% on year in FY26, a rate lower than the nominal GDP growth estimated of 10.1%.
In H1FY25, the Centre had borrowed Rs 7.4 lakh crore or 53.2% annual borrowing of Rs 13.9 lakh crore.
The fiscal deficit is estimated to be Rs 15.69 lakh crore in FY26, which was to be funded through net market borrowings of Rs 11.5 lakh crore and securities against small savings of Rs 3.43 lakh crore, among others.
The benchmark 10-year bond yield ended at 6.6% on Thursday, same as Wednesday’s close. The weighted average yield of fresh borrowing of the Centre declined from a high of 8.42 % in 2013-14 to 6.96 % in 2024-25 as of February 10, 2025.
The gross market borrowing in the first half of next fiscal would be completed through 26 weekly auctions. It will be spread over 3, 5, 7, 10, 15, 30, 40 and 50 year securities. The share of borrowing (including SGrBs) under different maturities will be: 3-year (5.3%), 5-year (11.3%), 7-year (8.2%), 10-year (26.2%), 15-year (14.0%), 30-year (10.5%), 40-year (14.0%) and 50-year (10.5%).
The government will carry out switching/buyback of securities to smoothen the redemption profile, the finance ministry said.
The government will continue to reserve the right to exercise greenshoe option to retain an additional subscription of up to Rs 2,000 crore against each of the securities indicated in the auction notifications.
Weekly borrowing through the issuance of Treasury Bills in the first quarter (Q1) of FY 2025-26 is expected to be Rs 19,000 crore for 13 weeks with issuance of Rs 9,000 crore under 91 day T-bill, Rs 5,000 crore under 182-day T-bill and Rs 5,000 crore under 364-day T-bill.
To take care of temporary mismatches in government accounts, the Reserve Bank of India has fixed the Ways and Means Advances (WMA) limit for H1 of FY 2025-26 at Rs 1.5 lakh crore.
In Budget FY26, the government chose to move to debt reduction as the core fiscal strategy, foregoing rigid annual fiscal deficit targets, and set an aim to reduce the ratio of the central-government debt to GDP to 50% by FY31, from the FY25 level of 57%. This compares with a goal of 40% set by an expert panel earlier. The shift in fiscal strategy could provide considerable operational flexibility for the Centre through Modi 3.0 government’s tenure.