India to borrow ₹6.61 lakh crore from market in H2, accounting for 47.2% of annual plan

The government of India, in consultation with the Reserve Bank of India (RBI), on Thursday (September 26) announced plans to raise ₹6.61 lakh crore in the second half (H2) of FY 2024-25, constituting 47.2% of its total gross market borrowing target of ₹14.01 lakh crore for the fiscal year, which is in line with expectations.

“Out of Gross Market borrowing of ₹14.01 lakh crore budgeted for FY 2024-25, ₹6.61 lakh crore (47.2%) is planned to be borrowed in H2 through issuance of dated securities, including ₹20,000 crore of Sovereign Green Bonds (SGrBs),” the Ministry of Finance said.

The borrowing will be conducted through the issuance of dated securities, including ₹20,000 crore in Sovereign Green Bonds (SGrBs), spread over 21 weekly auctions. These borrowings will cover maturities ranging from 3-50 years, with the largest share allocated to 10-year securities (24.8%).

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The government also plans to issue treasury bills worth ₹19,000 crore in the third quarter to manage short-term funding needs. Additionally, the Reserve Bank of India has set the ways and means advances (WMA) limit at ₹50,000 crore for the second half to address temporary mismatches in government accounts.

Department of Economic Affairs Secretary Ajay Seth said there are two considerations for the on-schedule H2 government borrowing.

“In order to smoothen repayments of borrowing from the two pandemic years, necessary adjustments will be made in dated security borrowings going forward. This will help the government observe its prudential limits in annual debt repayment, an approach that was adopted in the H2 calendar as well,” Seth said.

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Additionally, T-bill borrowings have been moderated, considering the current holding level and estimated cash flows. The government retains its borrowing target, aiming to raise ₹6.61 lakh crore in the second half to fund the revenue gap, he added.

Finance Minister Nirmala Sitharaman, in her interim budget, had proposed to borrow ₹14.13 lakh crore by issuing dated securities to meet revenue shortfall in the next financial year. However, she reduced the gross borrowing estimate by ₹12,000 crore in the Union Budget tabled in July 2024 on account of robust revenue collection.