Govt unlikely to raise FY24 borrowing plan; bond yields may remain below 7%

Railways, NHAI asked not to borrow from market

The Centre is unlikely to increase its borrowing plans for fiscal year 2023-24 (FY24) and expects bond yields to remain below 7 per cent.

A senior finance ministry official said the pressure on the bond market was also likely to wane as the Railways and the National Highways Authority of India (NHAI) have been told not to borrow from the market.

The government has planned to borrow Rs 15.43 trillion from the markets in FY24 to finance its fiscal deficit. If yields remain under check, then the government’s liability towards interest payment can also come down that helps in curbing government debt.

“So far, our numbers are looking good. Taxes are not impacted and expenditure is going as per pace,” the official said. 

Finance ministry had on Monday approved Rs 56,415 crore for 16 states to speed up their capital investments under the ‘Special Assistance to States for Capital Investment 2023-24’ Scheme.

In order to enable states to speed up capital spending, finance their development, welfare related expenditure and also to make resources available for priority projects and schemes, the finance ministry had also doubled the monthly devolution to states to Rs 1.18 trillion. 

The funds are to help states meet their share of funding for centrally sponsored schemes. The increased tax devolution was also done due to demand from the north-eastern states. 

“Tax flows are slow in the first quarter and even slower for states. At the Centre’s level we have more wriggle room (than states),” the senior official said, explaining the rationale behind increased devolution to states. 

While these are still early days, the government is concerned on three counts, the official said. “It will remain watchful of the monsoon situation and the global oil prices. The slow global economic growth too could be a challenge, but also beneficial for India as oil and food prices may go down,” the official said.