Will actively manage cash needs amid tight liquidity, says Ajay Seth

Don't want to miss the best from Business Standard?

Ruchi Bhatia, Siddhartha Singh and Shruti Srivastava

  India will actively manage its cash needs so as to not choke the private sector of funds amid tight banking liquidity, Economic Affairs Secretary Ajay Seth said in an interview. 

“The government, as a large borrower, is equally conscious of the fact that net available after government borrowing should be sufficient for the private sector,” Seth said in an interview after the federal budget.  

The government on Saturday projected a slightly higher-than-expected 14.82 trillion rupees ($171 billion) of bond sales in its budget. It, however, stayed the path of fiscal prudence targeting a deficit of 4.4% of GDP for the year starting April 1, against 4.5% earlier. 

The country’s banking system has been facing a liquidity squeeze with the deficit soaring to its widest in more than a decade last month as the central bank tries to curb the volatility in the rupee. 

The Reserve Bank of India has injected nearly $18 billion through tools like open market bond purchases and forex swaps to ease the cash crunch.  

“Instead of borrowing large amount and keeping it idle, we will operate it close to ways and means or even in ways and means,” Seth said.  

Ways and means advances are temporary loans given by the RBI to the federal and state governments to tide over any mismatch in receipts and payments. 

India will continue to switch bonds with the market to defer redemptions and may also buy back some bonds based on fund availability in the coming fiscal year, Seth said. 

New Delhi has pegged the next fiscal year bond switch at 2.5 trillion rupees while it hasn’t yet earmarked any amount for buybacks, budget documents showed. 

On the currency, Seth said that the monetary authority will continue to manage the short-term volatility. India’s import cover at 9-10 months was ‘huge’, he said.

 

--With assistance from Subhadip Sircar.

©2025 Bloomberg L.P.