India government cuts gross market borrowings to 14.01 trillion rupees for 2024-25

By Dharamraj Dhutia

MUMBAI (Reuters) – The Indian government lowered its planned gross market borrowing for the financial year ending March 2025 by 120 billion Indian rupees ($1.44 billion) 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 federal government borrowed 15.43 trillion rupees.

It aims to reduce its fiscal deficit to 4.9% of gross domestic product (GDP), down from 5.1% as per the 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 debt investors looking to invest in India.

MARKET REACTION

Government bond yields fell briefly after the borrowing cut.

The benchmark yield declined, hitting its lowest level since April 2022 to 6.9260%.

However, it rose again as the cut in borrowing was lower than what many market participants had anticipated. The yield was at 6.9687% on Tuesday, against 6.9588% before the budget announcement and 6.9633% previous close.

GRAPHIC

($1 = 83.6200 Indian rupees)