Govt's borrowing plan unchanged for H2 FY24; 50-year bond introduced

The central government has decided to borrow ₹6.55 lakh crore for the second half of the fiscal year 2023-24, sticking to its gross market borrowing plans of ₹15.43 lakh crore for the ongoing fiscal.

The gross market borrowing of ₹6.55 lakh crore in H2 will be completed through 20 weekly auctions. The market borrowing will be spread over 3, 5, 7, 10, 14, 30, 40 and 50-year securities.

The borrowing plan for the second half of the fiscal year will include the issuance of sovereign green bonds worth ₹20,000 crore.

Responding to market demand for longer duration securities, 50-year security will be issued for the first time, the ministry of finance says in a release.

The share of borrowing (including sovereign green bonds) under different maturities will be: 3 year (6.11%), 5 year (11.45%), 7 year (9.16%), 10 year (22.90%), 14 year (15.27%), 30 year (12.21%), 40 year (18.32%) and 50 year (4.58%).

The government will continue to carry out switching of securities to smoothen the redemption profile, says the finance ministry. "Out of the ₹1,00,000 crore of budgeted (BE) Switch amount, ₹51,597 crore of switch auctions have already been conducted and the balance amount of switch auctions will be conducted in H2," the ministry says.

The Centre will continue to exercise the green shoe option to retain an additional subscription of up to ₹2,000 crore against each of the securities indicated in the auction notification.

"Weekly borrowing through issuance of Treasury Bills in Third Quarter (Q3) of FY 2023-24 is expected to be ₹24,000 crore with net borrowing of ₹(-)52,000 crore during the quarter. There will be issuance of ₹7,000 crore under 91 DTBs, ₹8,000 crore under 182 DTBs and ₹9,000 crore under 364 DTBs in each auction to be conducted during the quarter," the ministry says.

To take care of temporary mismatches in government accounts, the Reserve Bank of India has fixed the Ways and Mean Advances (WMA) limit for H2 of FY 2023-24 at ₹50,000 crore.

The government is targeting a fiscal deficit of 5.9% for the current fiscal, lower than 6.4% last year. The Centre had borrowed ₹8.88 lakh crore between April and September out of the total market borrowings to the tune of ₹15.43 lakh crore projected in the Union budget for the fiscal.

GDP growth to decelerate in H2

India's GDP growth is likely to decelerate in H2 FY2024 on account of the impact of uneven and sub-par monsoons on agriculture output and the rural economy, lagged effects of monetary tightening on borrower household budgets, narrowing differentials in commodity prices with year-ago levels, continued drag stemming from the weakness in external demand, a potential slowdown in the government's capital spending ahead of the 2024 General Elections, and dissipation of the favourable base, according to rating agency ICRA.

ICRA expects the GDP to grow by 6.0% in FY24, with moderation from over 7% estimated for H1 FY24 to 4.5-5.0% in H2 FY24, well below the Monetary Policy Committee's (MPC) forecast of 5.7-6.0% for the second half of the fiscal.