Government's borrowing plan for H2 FY24 to remain unchanged
The Ministry of Finance is unlikely to alter the government's borrowing plan for the second half of FY24, maintaining the scheduled Rs. 6.55 lakh crore announced in late March. However, the ministry may reduce the number later in the year if revenues and other sources of deficit financing allow for it, as per Moneycontrol. When the government borrows less money from the market, it tends to lower interest rates for everyone else, which is generally considered a good thing.
Borrowing calendar decision by the end of September
Officials from the finance ministry and the Reserve Bank of India (RBI) are expected to meet in the last week of September to decide on the borrowing calendar for October 2023-March 2024. While there is speculation about the government borrowing less than originally intended, sources suggest that the finance ministry might not announce a reduction in borrowing when releasing the bond issuance calendar for the second half of 2023-24 to avoid affecting the bond market's outlook.
Small savings collections could impact decision
A surge in small savings collections could provide room for the government to lower its borrowings through bonds, as reported by Moneycontrol in August. The government funds its fiscal deficit through a mix of borrowings from the bond market, proceeds from small savings, and drawdown from the cash balance. A final decision on borrowing figures will be taken at the meeting between the finance ministry and RBI officials later this month.
Green bonds issuance in H2 2023-24
A portion of the Centre's borrowing during October 2023-March 2024 will be done via green bonds, which were first issued in Q4 2022-23. Despite dissatisfaction with the premium received in its debut green bond sale, the government may auction at least Rs. 16,000 crore worth of green bonds during H2 2023-24. The Centre had an internal figure of Rs. 25,000 crore for green bond issuances in 2023-24, having raised Rs. 16,000 crore through these bonds in 2022-23.
