India to ensure its record borrowing plan does not disturb markets
Uncertainty around the US-India trade deal has ended, economic affairs secretary adds
[NEW DELHI] The Indian government will use various instruments, including bond switches, to ensure its record borrowings in the fiscal year starting from April do not unsettle the market or push up yields, a senior finance ministry official said.
The borrowing plan will make sure rates are competitive and the market is not “disturbed”, Economic Affairs Secretary Anuradha Thakur said on Tuesday (Feb 3).
“Healthy markets are equally important for us,” she said, adding that uncertainty around the US-India trade deal has ended, lifting investor sentiment.
With the deal in place, “foreign portfolio investment sentiment will change... and the rupee has also started appreciating”.
India’s bond markets have been battered by hefty government borrowings, with investors expecting a record 30 trillion rupees (S$422.1 billion) of federal and state government debt supply in the next FY, at a time when the Reserve Bank of India’s (RBI) rate-cutting cycle is nearing its end.
Government bond yields determine the cost of borrowing for firms and households.
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New Delhi plans to borrow a record 17.2 trillion rupees from 2026 to 2027 – about 17 per cent higher than the current FY’s 14.61 trillion rupees, Finance Minister Nirmala Sitharaman said in her Budget speech on Sunday.
The benchmark 10-year bond yield jumped to a one-year high on Budget day, but dipped a day later after the announcement of the trade deal.
The government’s net borrowing, which excludes repayments for past debt, will rise to 11.73 trillion rupees in the next FY from 11.33 trillion rupees for the current year.
The borrowing calendar, managed by the central bank, will use a mix of switches, buybacks and open market operations to repay the past debt of 5.5 trillion rupees, balancing market developments with lower borrowing costs, Thakur said.
New Delhi typically conducts bond switches and buybacks to lower the supply of debt to the market.
The RBI, which sets the supply of money in the economy, buys or sells bonds through open market operations to influence banking system liquidity. It is the debt manager for the government.
India has set a target of 2.5 trillion rupees for bond switches from 2026 to 2027, while not specifying any buyback goal. REUTERS
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