The official, who did not wish to be named, said the yield on 10-year government securities (G-secs) will likely ease and remain below 7% in the coming months.
For its part, the Centre won’t raise its own gross market borrowing in FY24 beyond the budgeted level (₹15.43 lakh crore) to avoid any negative surprises, and the bond market won’t be flooded with government papers. “If anything, we may slightly reduce the borrowing,” the official said, indicating that private borrowers won’t be crowded out in the market at a time when capital spending by the private sector is expected to gain traction.
The 10-year benchmark G-sec yield remained little changed at 7.06% on Wednesday. It has inched up from a 13-month low of 6.96% on May 16 but still remains about 40 basis points lower than a nearly four-month high on February 27.
The central government on Wednesday permitted states to borrow an additional ₹1,43,332 crore in FY24 if they undertake power-sector reforms on top of ₹66,413 crore over the past two years.”Since the additional borrowing is linked to reforms, it may turn out to be lower later, although the Centre would like the states to actually undertake reforms and take full advantage of the extra borrowing space,” said another official.Moreover, given the sharp hike in capex budget of the railway and the road transport ministries, their affiliated entities are unlikely to borrow much from the market this fiscal year, finance ministry sources had earlier told ET. Also, the Centre’s budgeted long-term capex loans of a record Rs 1.3 lakh crore to states in FY24, against Rs 76,000 crore (revised estimate) in the last fiscal year, would cut their borrowing requirement proportionately, they had said.
