India Maintains Unchanged Borrowing Plan and Introduces 50-Year Bond

The Indian government has chosen to keep its borrowing plan unchanged for the second half of the fiscal year 2023-2024 (H2FY24). The government’s projected gross market borrowing for the fiscal year ending March 31, 2024, stands at Rs 15.43 lakh crore. Between April and September, the government successfully borrowed Rs 8.88 lakh crore.

Introduction of 50-Year Bond

• In a significant move, India has introduced a new security with a 50-year tenure, aiming to raise Rs 30,000 crore through this instrument.

Bond Tenure Diversity

• The government’s borrowing strategy involves issuing bonds with various tenures, including three, five, seven, 10, 14, 30, and now 40 years.

Green Bonds

• As part of the borrowing plan for the second half of the fiscal year, the government will issue government green bonds worth Rs 20,000 crore, which will include a new 30-year security.

Investor Confidence

• Economic Affairs Secretary Ajay Seth noted that there is a considerable interest from investors in longer-term bonds, which reflects strong confidence in the Indian economy.

Weekly Borrowing Range

• The government intends to borrow between Rs 30,000 crore and Rs 39,000 crore per week during the second half of the fiscal year.

Background

• The Indian government’s borrowing has steadily increased since 2019, primarily to finance a widening fiscal deficit resulting from extensive social spending during the pandemic.

Fiscal Deficit Target

• Despite the increased borrowing, the government is targeting a fiscal deficit of 5.9% for the current fiscal year, a decrease from the 6.4% recorded in the previous year.
• Economic Affairs Secretary Ajay Seth emphasized the government’s commitment to sticking to this fiscal deficit target.

Reserve Bank’s Support

• The Reserve Bank of India has set Ways and Means Advances, temporary advances provided by the central bank to governments to bridge financing gaps, at Rs 50,000 crore for the October-March period to support the government’s financial operations.

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