Government to borrow Rs 14.13 lakh crore in FY25, bond yields plunge

Budget 2024: Finance Minister Nirmala Sitharaman announced on Thursday that the government intends to borrow a gross sum of Rs 14.13 lakh crore in the fiscal year commencing April 1, a decrease from the current fiscal year's borrowing of Rs 15.43 lakh crore. 

Net borrowings for the upcoming financial year are anticipated to remain largely unchanged at Rs 11.75 lakh crore compared to the present fiscal year. 

Notably, the gross borrowing figure falls short of economists' expectations, which stood at Rs 15.6 lakh crore, according to a Reuters poll.

The announcement of lower-than-anticipated borrowing targets led to a notable drop in India's 10-year benchmark yield, reaching 7.0511 per cent, down by as much as eight basis points.

The proceeds from market borrowings will primarily fund a fiscal deficit, projected at 5.1 per cent of gross domestic product (GDP) for the fiscal year.

To manage its debt profile effectively, the government plans to execute switch auctions totalling Rs 1  lakh crore throughout the year. These auctions aim to swap bonds expiring in the near term with longer-tenor securities, as outlined in budget documents.

In addition to market borrowings, the government aims to raise Rs 4.66 lakh crore through India's small savings fund to bridge the budget gap for the upcoming fiscal year.

The government's borrowing strategy aligns with efforts to maintain fiscal stability while addressing economic imperatives, underscoring a cautious approach to managing public finances amidst evolving market dynamics and fiscal challenges.

(With Reuters Inputs)