The Centre’s market borrowing plan, along with RBI’s monetary stance, would indicate the direction in which bond yields are headed
Interim Finance Minister Piyush Goyal said the gross market borrowing was seen at Rs 7.1 lakh crore in FY20.
Because of the increase in repayments due in the coming year (Rs 2.5 lakh crore in FY2020 against Rs 1.6 lakh crore in FY19), market participants were keen to know the size of the planned market borrowings for FY20.
The Centre’s market borrowing plan, along with the Reserve Bank of India (RBI)’s monetary stance, would indicate the direction in which the bond yields are headed.
A Bank of America Merrill Lynch report had earlier noted that the government may not borrow more to the deficit will be funded by drawing down on government balances with the RBI which, as of March 2018, had stood at Rs 1.675 trillion. The net government borrowing may come in at Rs 5.07 trillion for FY20, it estimated.
The State Bank of India (SBI), in its research report issued on January 30, said the government's gross market borrowing in FY20 will be Rs 6.50 trillion, while net market borrowing to be at Rs 4.13 trillion, less than FY19 estimate of Rs 4.20 trillion.
In September 2018, the Centre had cut its gross borrowing for the year by Rs 70,000 crore and stuck to the net borrowings planned in the budget. The move hinted at its intent to meet the fiscal deficit target for the year.
The reduction in gross borrowings, planned to be met partly by small savings and lower smaller buyback programme, was to cool bond yields and reduce pressure on the bond market.
Anjan Ghosh, Executive Vice-President & Chief Rating Officer, ICRA, had earlier said: “We also expect an enhancement in the allocations towards affordable housing, roads, railways, ports, inland waterways and smart cities etc., supplemented by extra-budgetary sources of funds such as institutional finance and market borrowings of the public sector enterprises and the National Investment and Infrastructure Fund (NIIF).”Indian Union Budget 2019: What does the FM have up his sleeve in the run up to the General Elections? Click here for live Budget 2019 news, views, analyses and more.
