Gross market borrowing likely to be at Rs 15.2 trillion in FY25

Gross market borrowing: The gross market borrowing of the government is expected to be Rs 15.2  trillion in FY25, the Emkay reports mentioned in its pre-budget note.  “We expect FY24E fiscal borrowing to be in line with the budget, at (Rs15.4trn), despite the higher cash surplus with the government and the relatively higher run-rate of small savings so far,” the report added. 

According to Emkay,  67.4 per cent of the fiscal deficit is funded by net market loans, while small savings would be ~26.9 per cent of FY24E fiscal funding, against 23.3 per cent in FY23.  

Throwing light on FY25, Emkay added that they expect gross borrowings to remain elevated (Rs 15.2 trillion), with net borrowing at Rs 11.5 trillion – which is around 65 per cent of the total fiscal funding. 

Similarly, the government net- borrowing is expected to be at Rs 11.3-11.6 trillion in FY25, a CareEdge said in its pre-budget memorandum. 

Consistent with previous practices, government borrowing is likely to be frontloaded in the first half, allowing states/corporates room to borrow in the latter half of the fiscal year. 

“Overall, a lower supply of G-secs in FY25, combined with increased demand resulting from passive inflows following India's inclusion in global bond indices, is expected to ease G-sec yields in the next fiscal,” the pre-budget note stated. 

According to ICRA, compared to the planned market issuances of Rs 15.4 trillion for FY2023, 87 per cent or Rs. 13.4 trillion have been raised to Jan 5, 2024, 11.2 per cent higher than the Rs 12.1 trillion recorded in the corresponding period of FY23. However, owing to the 21.7 per cent surge in redemptions on a YoY basis, the GoI’s net borrowings grew by a relatively slower 7.5 per cent to Rs. 9.6 trillion up to Jan 5, 2024, from Rs. 8.9 trillion in the year-ago period. 

“Redemptions worth Rs. 0.6 trillion are pending during Q4 FY2024, against nil in the year-ago quarter. Given this and the required gross market borrowings in the remaining part of the fiscal being similar to the year-ago levels, the GoI’s net borrowings are imputed to decline by a sharp 28.3 per cent YoY to Rs. 1.4 trillion during this period,” ICRA added further.

The GoI had mildly raised the net amount from small savings to fund its fiscal deficit to Rs. 4.7 trillion in FY2024 BE from Rs. 4.4 trillion in FY2023 RE.