Falling oil prices help govt trim borrowing target by Rs8,000 crore

A fall in the international prices of crude oil has helped India reduce its subsidy outgo on fuels and thereby trim its borrowing target. The central government will borrow Rs8,000 crore less than its budget estimates for the current fiscal following an improvement in the country's fiscal position.

The central government on Friday said it would borrow Rs2,40,000 crore from the market in the second half of the current fiscal, Rs8,000 crore less than the annual estimate.

The government had cut first half borrowing by Rs16,000 crore to Rs3,52,000 crore from the initially planned Rs3,68,000 crore. It will thus borrow Rs5,92,000 crore through issue of dated securities for the entire fiscal against the budget estimate (BE) of Rs6,00,000 crore.

"We are very confident that we will be able to manage without additional borrowing," finance secretary Arvind Mayaram said on Friday. "As far as fiscal deficit is concerned we are still sticking to the target of 4.1 per cent," he said.

Mayaram said there would be no additional borrowing through T-bills in the third quarter, which means the treasury bills maturing in the quarter will be rolled over.

T-bills borrowing during the October-December 2014 quarter will be Rs1,98,000 crore, according to the Reserve Bank of India.

The cut in borrowing plans, which comes ahead of the Reserve Bank's monetary policy on Tuesday, sent the benchmark 10-year bond yield down 5 basis points to 8.44 per cent.

The announcement, which came in shortly after sovereign credit rating agency Standard & Poor's upgraded its India outlook, helped further boost market sentiment (See: S&P revises outlook on India from negative to stable).

It may be noted that the decision to lower the borrowing target was also aided by a higher than budgeted surplus transfer by the RBI, an increase in divestment proceeds and tax revenue recovery. The RBI transferred its entire surplus of Rs52,679 crore to the central kitty, a 60-per cent increase over last year.

The government's market borrowing had touched 61.2 per cent of the budgeted target for 2014-15 in the first four months of the year, but the government is confident that as inflows improve in the second half it would be well within the targeted 4.1 per cent of GDP.

The RBI and finance ministry officials, meanwhile, finalised the borrowing calendar for the second half of the current financial year and decided to undertake substantial switch, buyback operations, including developing a buyback and switch calendar from the next financial year for better debt management.