The government on Friday said it would borrow Rs 2.5 lakh crore in the first half of financial year 2011-12, or 60 per cent of its total gross requirements for the year, of Rs 4.17 lakh crore. This is lower than the market expectation. Analysts had expected the April-September borrowing figure to be around 65 per cent of the total planned, in line with the government’s past practice of front-loading as much as possible.
Officials from the finance ministry and the Reserve Bank of India (RBI) on Friday worked out the government borrowing calendar for April-September. The government will borrow a net Rs 1.9 lakh crore (gross borrowing minus redemptions due in that time, which would be about Rs 60,000 crore) from April to September. Net borrowing for all of 2011-12 is pegged at Rs 3.43 lakh crore.
Economic affairs secretary R Gopalan said the government had decided to frontload its borrowing to allow space for private sector borrowing in the second half of 2011-12. “Our economy is growing and our requirement in absolute terms is also the same, which means in percentage terms, the borrowing is less, and so there is free space for the private sector to access the market,” he said.
“The borrowing for the first half is lower than what we expected. The markets are viewing this positively and yields are expected to be lower than current levels, at least for the first month of next financial year,” said a senior official from Union Bank of India.
Reflecting market sentiment, the yield on the most traded 11-year 8.13 per cent government security fell to 8.02 per cent on Friday from its previous close of 8.06 per cent.
According to the issuance calendar published by RBI on Friday, the government will borrow Rs 10,000-12,000 crore per week. “This should go through without much pressure on the market,” said a bond dealer with a domestic brokerage firm.
The government had planned to borrow Rs 2.87 lakh crore in the first half of the current financial year, 2010-11, of which it borrowed Rs 2.8 lakh crore. The year’s total gross borrowing came to Rs 4.37 lakh crore and net borrowing was Rs 3.25 lakh crore.