India Budget: India government cuts gross market borrowings to 14.01 trillion rupees for 2024-25 (updated)

Karur Vysya Bank

23/07/2024 07:55

(Updates market reaction, quotes)
    By Dharamraj Dhutia
       MUMBAI, July 23 (Reuters) - The Indian government has
lowered its planned gross market borrowing by 120 billion rupees
($1.44 billion) for the financial year ending March 2025,
Finance Minister Nirmala Sitharaman announced in the federal
budget on Tuesday.
    The government aims to borrow a gross of 14.01 trillion
rupees, down from 14.13 trillion rupees announced at the time of
the interim budget in February.
    In the previous financial year, the government borrowed
15.43 trillion rupees. 
    It also aims to reduce its fiscal deficit to 4.9% of gross
domestic product (GDP), down from 5.1% in interim budget. 

WHY IT'S IMPORTANT 
    Government borrowings are one of the key drivers for bond
yields, which have fallen since the start of this financial
year.
    India's government finances have also come into sharper
focus this year as local currency bonds have been included in
JPMorgan's emerging market debt index.
    Foreigners bought $8 billion worth of bonds on a net basis
in 2024, and the outlook on government finances is being watched
keenly by offshore investors.
    
MARKET REACTION
    Government bond yields eased briefly, with the benchmark
10-year bond yield  IN10YT=RR  easing to 6.9260%, lowest since
April 2022. 
    However, yields reversed immediately as cut in borrowing was
below what many market participants were anticipating. 
    The benchmark bond yield  IN071034G=CC  was at 6.9723%,
against 6.9633% previous close.
 
KEY QUOTES
    We aim to reach fiscal deficit below 4.5% next year. From
2026-27 onwards, our endeavor will be to keep fiscal deficit
such that central government debt as a percentage of GDP will be
on a declining path, Finance Minister Nirmala Sitharaman said. 
    "There is some position adjustment as a kneejerk reaction as
some investors were expecting a larger cut. Overall budget is
positive with priority given to fiscal prudence. I expect
benchmark bond yield to ease to 6.90%, with an upside cap of
7.00%," said VRC Reddy, treasury head at Karur Vysya Bank.
    
    "The long-end yields may see some selling pressure, while
short-term yields could ease. Still, the benchmark bond yield is
likely to top at 7.02%," said Vijay Sharma, senior executive
vice president at PNB Gilts.
    
GRAPHIC
 

 ($1 = 83.6200 Indian rupees)

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government's gross market borrowings    https://reut.rs/4d6j48F
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 (Reporting by Dharamraj Dhutia; Editing by Janane Venkatraman
)
 ((Dharamraj.Dhutia@thomsonreuters.com;))