Vote on Account 2014: Investors upbeat on FM's Rs 5.97 lakh crore 'market borrowing programme'

MUMBAI: Finance Minister P Chidambaram announced a gross market borrowing programme for Rs 5.97 lakh crore in the interim budget for 2014-15. The quantum, which is lower than what was expected, has generated a positive sentiment among investors.

This figure may be tweaked when the new government presents the full budget for FY15 in June-July.

“Essentially, it is showing that fiscal deficit management is underway,” said NS Venkatesh, head of treasury at IDBI Bank. “Market was expecting gross borrowing above Rs 6 lakh crore. On easing inflation, the 10-year yield should touch 8.60-8.65% by first week of March.”

But the 10-year benchmark bond yield on Monday was little changed at 8.80% after hitting an-intra-day low at 8.77. Dealers said it was because of profit booking by some investors. Bond yields and prices move in opposite directions.

For 2013-14, the government had planned Rs 5.79 lakh crore gross borrowing. The net borrowing (adjusted of repayments) is pegged at Rs 4.57 lakh crore, which is 86.5% of the fiscal deficit.

“Lower net government borrowing of Rs 4.57 trillion in FY15 compared with Rs 4.68 trillion in FY14 is positive for bond market,” said Nirakar Pradhan, chief investment officer at Future Generali Life Insurance (India). “It provides space for borrowing by corporate.”

Assuming market borrowings at about 86% of gross fiscal deficit, the net market borrowings are likely to decline to 3.6% of GDP in 2014-15, 3.1% in 2015-16 and 2.6% in 2016-17, the finance minister said in his interim budget statement.