India sets Rs7.24 lakh crore borrowing target for first half of FY22

That compares with 60 per cent to 65 per cent of total bonds the government usually issues for the period.

While the announcement of the fiscal first-half borrowing plan is largely in line with expectations, the bond market, which is facing near-record debt sales, will have to contend with a large supply of bonds in the fiscal year starting April, which makes the paper more unappealing. With unprecedented debt supplies during the pandemic over the past fiscal, sovereign bonds are facing the worst times in almost three years.

In order to enable institutional and retail investors to plan their investments efficiently and provide transparency and stability to the government securities market, the government, in consultation with the Reserve Bank of India (RBI)) has published an indicative calendar for issuance of dated securities for the first half of the fiscal year 2021-21 (1 April to 30 September 2021)/

As per the issuance calendar for Government of India dated securities, the Reserve Bank will sell government bonds for Rs32,000 crore on 5-9 April  2021; bonds for Rs26,000 crore on April 12-16; bonds for Rs32,000 crore on 19-23 April; bonds for Rs26,000 crore on 26-30 April: bonds for Rs32,000 crore on 3-7 May 2021; bonds for Rs26,000 crore on 10-14 May 2021; bonds for Rs32,000 crore on 17-21 May 2021; bonds for Rs26,000 crore on 24-28 May 2021: bonds for Rs32,000 crore on 31 May-4 June; bonds for Rs26,000 crore on 7-11 June 2021: bonds for Rs32,000 crore on 14-18 June 2021; bonds for Rs26,000 crore on 21-25 June 2021; bonds for Rs32,000 crore on 28 June-2 July 2021; bonds for Rs26,000 crore on 5-9 July 2021; bonds or Rs32,000 crore on 12-26 July 2021; bonds for Rs26,000 crore on 19-23 July 2021; bonds for Rs32,000 crore on 26-30 July 2021; bond for Rs26,000 core on 2-6 August; bonds for Rs31,00 crore on 9-13 August 2021; bonds for Rs26,000 crore on 16-20 August 2021: bonds for Rs31,000 crore on 23-27 August 2021; bonds for Rs26,000 crore on 30 August-3 September 2021; bonds for Rs31,000 crore on 6-10 September 2021;  bonds for Rs26,000 crore on 13-17 September 2021; and bonds for Rs31,000 crore on 20-24 September 2021, adding up to a total of Rs7,24,000 crore as of end-September 2021.

"In the Budget, we had announced that there would be a gross borrowing of Rs 12.05 lakh crore and net borrowing of Rs 9.37 lakh crore. "In the first half of 2021-22, we would be borrowing Rs 7.24 lakh crore, which is 60.06 per cent of the gross issuances," Bajaj said.

He said the government would issue 2-year, 5-year, 10-year, 14-year, 30-year, and 40-year securities. On the expected rate for the next financial year, Bajaj said the Reserve Bank of India (RBI) will take appropriate action to ensure that yields remain in reasonable limit.

Gross borrowing includes repayments of past loans. Repayment for past loans in the next financial year has been pegged at Rs 2.80 lakh crore. "The gross borrowing from the market for the next year would be around Rs 12 lakh crores.

"We plan to continue with our path of fiscal consolidation, and intend to reach a fiscal deficit level below 4.5 per cent of GDP by 2025-26 with a fairly steady decline over the period," Finance Minister Nirmala Sitharaman had said while presenting Budget 2021-22 last month. The government raises money from the market to fund its fiscal deficit through dated securities and treasury bills.

The Budget has pegged fiscal deficit at 6.8 per cent for the next fiscal, down from 9.5 per cent of the gross domestic product (GDP) in the current financial year. "The fiscal deficit in RE 2020-21 is pegged at 9.5 per cent of GDP. We have funded this through government borrowings, multilateral borrowings, small saving funds and short-term borrowings," she had said.

Bajaj said the fiscal deficit for the current fiscal would be around the Revised Estimate announced in the Budget. "Fiscal deficit number in February may be low at 76 per cent but in March, we have pushed a lot of expenditure. So, it should be closer to the number mentioned in RE in the Budget," he said.

Against the Revised Estimate of Rs12.80 lakh crore, the government borrowed Rs12.60 lakh crore during the current fiscal as the last auction of Rs20,000 crore was cancelled. In addition, the Government of India borrowed Rs1.10 lakh crore on behalf of states for compensation towards goods and services tax (GST) shortfall.

In all, the government borrowing was Rs13.71 lakh crore, while the net borrowing was Rs11.03 lakh crore during the current fiscal. Bajaj said the yields during the year remain stable except during the past few auctions that happened during March.

The record borrowing was done at a weighted average borrowing cost of 5.79 per cent which is the lowest since 2004-05, he said adding that the weighted average maturity was 14-1/2 years. Meanwhile, the RBI circular said the limits for FPI investment in corporate bonds will remain unchanged at 15 per cent of outstanding stock of securities for the financial year 2021-22.

Accordingly, the revised limits for FPI investment in corporate bonds will be Rs5,74,263 crore (April-September 2021) and Rs6,07,039 crore in the second half of the fiscal. The current limit is Rs5,41,488 crore. The central bank further said the revised limits for FPI investment in central government securities (G-secs) and state development loans (SDLs) for 2021-22 will be announced separately. The current limit of Rs2,34,531 (G-sec general), Rs 1,03,531 (G-secs long-term), Rs 67,630 crore (SDL general) and Rs 7,100 (SDL long-term) will continue till the annoucement is made regarding revised limits.