The centre will continue to build on its FY23 borrowing plan, approved in March, despite the recent drop in bond yields, as it expects the market to calm down soon. Some expected the centre to hold onto some offers after bond yields soared.
“We think yields will decline… The strong growth lately is mainly due to geopolitical factors,” the government official said, adding that the borrowing plan had already ended and would continue as announced.
Benchmark 10-year government bond yields rose to 7.25% earlier in the month from an average of 6.83% in March, reacting to a 17-month high of 6.95% in inflation of Indian retail prices in March. Russo-Ukrainian conflict, fears of spikes in oil prices and rising interest rates in the US The yield has since dropped to around 7.1%.
States are likely to borrow less this year, after centralized cash transfers in March and a Rs 1 trillion investment support announced in the budget, the official said.
This will leave the Centre free to borrow via dated pegged securities at a gross amount of 14.95 lac crore in FY23. Gross market lending is now expected to be 14.31 lac crore lower after swaps. completed on January 28, 2022.
The Centre and the Reserve Bank of India (RBI) are closely monitoring the bond market in relation to geopolitical events.
According to a timetable announced last month, the centre will provide a loan of Rs 23.8.45 crore in the first half of the fiscal year.
In March, the centre committed £2.4 million to states, beating revised FY22 budget estimates.
In addition, loans of 1 lakh 23 crores are provided in the fiscal year budget for capital expenditure of the government. The government's lending needs could be reduced by that amount, the official said, adding that this should smooth out yields.
Net public debt in FY22 was projected at Rs 9.17 crore, but was reduced to Rs 8.75 crore in revised estimates due to higher tax revenue.
The centre also absorbed £5.9bn of government loans to offset Goods and Services Tax (GST) and cancelled some auctions worth over Rs75bn due to strong returns and good financial health.
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