India’s high government borrowing could be offset by lower debt issuance: ICICI Sec

MUMBAI (Reuters) – A potential increase in Indian government borrowing in the second half of this financial year could be offset by a decline in debt issuance by states, ICICI Securities Primary Dealership said.

“The sharp decline in state borrowing will more than offset the rise in central dated borrowing, economists Prasanna A and Abhishek Upadhyay said in a note on Friday.

“In this sense, total SLR (Statutory Liquidity Ratio) borrowing would be lower than projected in the budget,” economists Prasanna A and Abhishek Upadhyay said in a note.

India aims to borrow 14.31 trillion Indian rupees ($179.25 billion) on a gross basis through the sale of bonds this fiscal year, of which 5.86 trillion rupees is scheduled for October-March .

The lead dealer, however, expects the government to revise its gross borrowing to Rs 15.1 trillion for the year, which could lead to an additional debt supply of around Rs 800 billion.

He expects, however, that states will borrow less than what was projected according to their budget estimates.

The dealer expects gross state borrowing to hit 6.8 trillion rupees, which is 2.1 trillion rupees less than its estimate at the time of state budgets. “Thus, the decline in state borrowing creates space for additional borrowing by center,” the note said.

India is expected to announce its borrowing schedule by the end of this month, while states announce a quarterly schedule.

States have only borrowed about 2.39 trillion rupees so far this financial year, against a schedule of 3.58 trillion rupees.

The state’s narrow development loans spread over government securities could hold up in the second half, he said. “We believe these trends should play out regardless of news regarding the inclusion of Indian bonds in global bond indices,” the economists said.

The memo adds, however, that news of additional borrowing from the center could come later, as much of the additional revenue spending is lumpy and backbone, and may not occur until January-March.

“The probability of further borrowing is based on a binary event, i.e. the extension or cessation of free food grains


($1 = 79.8340 Indian rupees)

(Report by Dharamraj Lalit Dhutia)

(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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