Centre cuts FY27 market borrowing to Rs 15.99 lakh crore; targets longer debt maturity
The Centre has cut FY27 gross market borrowing to Rs 15.99 lakh crore from Rs 17.2 lakh crore budgeted, seeking to limit pressure on bond yields amid global uncertainty. It will borrow Rs 7.86 lakh crore in the second half, including Rs 15,000 crore through sovereign green bonds, while extending debt maturities.
The Indian government has reduced its market borrowing for the fiscal year 2027-28 to ₹15.99 lakh crore, a decrease of ₹1.2 lakh crore, as it aims to curb rising yields due to global uncertainties. Initially, the government had targeted ₹17.2 lakh crore in market borrowing for the year, but following the Reserve Bank of India's intervention in auctions, the borrowing has been cut to around ₹16.09 lakh crore.
Out of this, ₹8.2 lakh crore or 51% is planned for the first half of the fiscal year. The remaining ₹7.86 lakh crore is set for the second half, with the issuance of dated securities, which includes ₹15,000 crore sovereign green bonds.
Despite the fiscal pressures, the government remains committed to fiscal prudence, as stated by Anuradha Thakur, secretary of the Department of Economic Affairs. The lower borrowing program aligns with the broader fiscal consolidation strategy, with the fiscal deficit for FY27 set at 4.3% of the gross domestic product (GDP).
The government reserves the right to exercise the greenshoe option, which allows for additional subscription up to ₹2,000 crore against each of the securities indicated in auction notifications. This move comes with a wage and mean advances limit of Rs 50,000 crore in the second half. By focusing on the long end of the yield curve, the government hopes to increase its weighted average maturity (WAM), which had declined in the first half.
A longer WAM will help reduce rollover risk, according to Thakur. The government is managing its debt prudently through switches and buybacks, aiding the market without adding additional pressure.
India's 10-year benchmark bond yield closed at 7.1194% on Friday, continuing its upward trend for the sixth consecutive week, in line with expectations following recent switches in the market. The market borrowing will be spread across securities with tenors ranging from three to 50 years, as per the finance ministry's borrowing calendar announced on Friday.
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