NEW DELHI: India will borrow a gross 3.68 trillion rupees ($61.4 billion) in the first half of the fiscal year that begins on April 1, or 61.6 percent of the full-year target, Arvind Mayaram, the country’s economic affairs secretary said.
In the interim budget unveiled in February, the government had announced it would borrow 5.97 trillion rupees ($99.68 billion) via bond sales during the full fiscal year ending in March 2015.
The first-half borrowing is in line with the country’s traditional practise of raising 60-65 percent of the budgeted amount for the full year during the April-September period. India borrowed around 65 percent of its full year needs during the first half of 2013/14.
Still, bond investors worry India will be forced to raise its borrowing target for the next fiscal year regardless of who wins elections concluding in May, given concerns the current government’s clampdown in spending is seen as unlikely to be sustained.
The opposition Bharatiya Janata Party, which is leading in almost all polls ahead of elections, would also not be bound by the current government’s borrowing projections and might look to revise them in its budget after the elections.
“The (first-half borrowing) number is better than last year,” said Manoj Rane, managing director and head of fixed income and treasury at BNP Paribas.
“However, the new government will have its own budget, and fiscal deficit (projection) will certainly be higher than 4.1 percent, which could lead to higher borrowing.”
While Finance Minister P. Chidambaram has pledged to lower the fiscal deficit to 4.6 percent of gross domestic product (GDP) this year, below the original target of 4.8 percent, analysts say the country will do so by either cutting or deferring substantial expenditure.
Expectations this spending would need to come back have made markets skeptical the new government can meet the current target of a fiscal deficit of 4.1 percent of GDP for 2014/15.
Investors in India focus on debt borrowing levels given their importance in containing the country’s fiscal deficit and helping to finance government spending.
Adding to fiscal woes is the struggle to revive Asia’s third largest economy, which is growing at around a decade low and led New Delhi to miss tax revenue projections for three consecutive years.
Projections for this year are seen as particularly unrealistic, with the government expecting a record growth of 18 percent in tax revenue.