Govt's market borrowing seen at Rs 2.4 lakh cr in second half of FY16

Gross market borrowing was Rs 3.6 lakh cr in first half of the fiscal

The government is expected to go for a gross market borrowing of Rs 2.4 lakh crore in the second half of the current financial year. This would include dated securities and sovereign gold bonds.

According to experts, the gross market borrowing will be a bit higher if buybacks and switches form a part of the borrowing calendar. According to the issuance calendar of dated securities released in March, the gross market borrowing was Rs 3.6 lakh crore in the first half (April-September) of the financial year. The gross market borrowing for the entire financial year was pegged at Rs 6 lakh crore.

“The gross market borrowing will be Rs 2.4 lakh crore in the second half of the fiscal excluding buybacks and switches. But if the cancelled auction is taken into account, then it would be an additional Rs 9,000 crore borrowing,” said Badrish Kulhalli, fund manager (fixed income) at HDFC Life. In the first half of the financial year, the Reserve Bank of India (RBI) had cancelled an auction partially and it was to the tune of Rs 9,000 crore. The total auction size was Rs 15,000 crore. The central bank said in its annual report that buybacks and switches in government securities would be included as part of the regular calendar of issuances from the second half of FY16. 

“The partially cancelled auction may be adjusted in the fourth quarter of the fiscal. If the market borrowing is as per expectations, then it will not have any negative impact on the bond market,” said S Prabhu, head of fixed income at IDBI Federal Life Insurance.

It is believed that the government will auction a small quantum of sovereign gold bonds now and based on the response, more would be auctioned later. “The government may go for conservative estimates for sovereign gold bonds for about Rs 1,000 crore to Rs 5,000 crore. They may come up with a caveat that in case the flows for gold bonds are good, then they will increase the supply of gold bonds later and accordingly reduce the borrowing from dated securities,” said Kulhalli.

Some experts believe the inclusion of buybacks and switches in the borrowing calendar of the second half of the financial year will depend on favourable market conditions. If the situation is not favourable, then it might be announced separately at an opportune time.