Centre cuts FY27 market borrowing to Rs 15.99 lakh crore; targets longer debt maturity

New Delhi: The government has further pared its full-year market borrowing to ₹15.99 lakh crore, a reduction of ₹1.2 lakh crore as it seeks to contain rising yields amid global uncertainties. Market borrowing this fiscal year was pegged at ₹17.2 lakh crore in the budget estimate, but following the Reserve Bank of India's switch auctions, gross borrowing for the year was cut to around ₹16.09 lakh crore, of which ₹8.2 lakh crore or 51% is planned for the first half.

However, the Centre will borrow ₹7.86 lakh crore in the second half of the fiscal by issuing dated securities, including ₹15,000 crore sovereign green bonds, showed the borrowing calendar announced by the finance ministry on Friday.

"Net market borrowings (market borrowings for fiscal deficit financing) are kept at budget levels, implying that in spite of the incipient fiscal pressures, the government is committed to the path of fiscal prudence laid out in the budget," said Anuradha Thakur, secretary, Department of Economic Affairs. The lower borrowing programme is in line with the broader fiscal consolidation path, with fiscal deficit for FY27 targeted at 4.3% of gross domestic product (GDP).

"The government, in consultation with RBI, reserves the right to exercise the greenshoe option to retain additional subscription up to ₹2,000 crore against each of the securities indicated in auction notifications," the ministry said.

Reducing rollover risk

This is accompanied by a wage and mean advances limit of Rs 50,000 crore in the second half.

"The focus on the long end will help us increase our weighted average maturity (WAM), which had fallen during the first half. A longer WAM will help reduce the rollover risk," Thakur said, adding that the government is managing its debt in the most prudent manner by resorting to switches and buybacks and is aiding the market by not adding any additional pressure.

India's 10-year benchmark bond yield closed at 7.1194% Friday, continuing its surge for the six straight week.

"The amount is in line with our expectations following the switches that have taken place in the last few months," said Aditi Nayar, chief economist at Icra.

The market borrowing will be spread across securities with tenors of three, five, seven, 10, 15, 30, 40 and 50 years, according to the finance ministry.