The Telegraph
Saturday , March 29 , 2014
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Bulk of borrowing by govt in first half

Mumbai, March 28: The Centre has said it will borrow Rs 3.68 lakh crore in the first half of 2014-15.

This means it intends to front-load its borrowing programme by raising 61.6 per cent of its projected gross borrowings, amounting to Rs 5.97 lakh crore in the interim budget.

“The borrowing number is mildly comforting,” said Harihar Krishnamoorthy, treasurer at FirstRand Bank, and in line with the trend in the past couple of years when the government has raised 60-65 per cent of its borrowings in the first half.

“There are no serious surprises here and it exactly follows the pattern seen over the last couple of years,” Hariharan added.

While Krishnamoorthy hinted that the number itself would not make any major impact on government security prices, he said a big chunk of government loans would be maturing in the next couple of months and the front-loading would take care of those payments.

Arvind Mayaram, secretary at the department of economic affairs, announced that the net borrowing would be Rs 4.57 lakh crore, around 3 per cent lower than the current fiscal. The borrowing calendar for the first half will translate into the government raising between Rs 14,000 crore and 20,000 crore through the issue of dated securities on a weekly basis during the April-September period.

“This (market borrowing plan) is in line with the fiscal correction by the government. We are confident that the borrowing programme will be conducted smoothly. We have assessed demand from the banks, which is robust. This year the borrowing programme was conducted smoothly. The fiscal deficit target will be met,” he added.

Mayaram also said the government would continue to float inflation index bonds that would form part of the borrowing programme in the first half.

The net borrowing through T-bill for the first quarter (April-June) may be kept Rs 40,000 crore, he said.

Today’s announcement of the borrowing calendar comes ahead of the Reserve Bank of India’s bi-monthly monetary policy where it is largely expected to keep benchmark rates on hold.

The bond market is waiting for the formation of a new government after the elections in May amid apprehensions that its borrowing plan may be revised upwards.