Government’s Fiscal Strategy Unveiled: Borrowing Plans for H1 of FY 2024-25

The Government of India, in tandem with the Reserve Bank of India (RBI), has outlined its borrowing agenda for the first half (H1) of the fiscal year 2024-25 (FY 2024-25). Let’s delve into the details of this crucial financial strategy.

Gross Market Borrowing Overview

Out of the projected Rs 14.13 lakh crore for FY 2024-25, the government plans to borrow Rs 7.50 lakh crore (53.08%) during the first half. This borrowing will primarily occur through dated securities, with an additional Rs 12,000 crore earmarked for Sovereign Green Bonds (SGrBs).

Introduction of New Securities

Responding to market dynamics and aligning with global practices, the government has introduced a new dated security with a 15-year tenor, broadening the spectrum of available investment options.

Auctions and Maturity Profile

The gross market borrowing of Rs 7.50 lakh crore will be dispersed over 26 weekly auctions. These securities will span various maturities ranging from 3 to 50 years. The distribution of borrowing across different maturities, including SGrBs, is as follows:

• 3-year: 4.80%
• 5-year: 9.60%
• 7-year: 8.80%
• 10-year: 25.60%
• 15-year: 13.87%
• 30-year: 8.93%
• 40-year: 19.47%
• 50-year: 8.93%

Management Strategies

To ensure a balanced redemption profile, the government will engage in securities switching. Additionally, it reserves the option to exercise the greenshoe option, allowing for an additional subscription of up to Rs 2,000 crore for each security indicated in auction notifications.

Treasury Bills Issuance

In the first quarter (Q1) of FY 2024-25, weekly borrowing through Treasury Bills is expected to total Rs 27,000 crore for the initial seven auctions and Rs 22,000 crore for the subsequent six auctions. Notably, there will be a net borrowing of Rs (-)3,000 crore during this quarter. The breakdown of weekly issuance includes:

• Rs 12,000 crore under 91-day Treasury Bills
• Rs 7,000 crore under 182-day Treasury Bills
• Rs 8,000 crore under 364-day Treasury Bills

Ways and Means Advances (WMA) Limit

To address temporary imbalances in government accounts, the RBI has set the Ways and Means Advances (WMA) limit for H1 of FY 2024-25 at ₹1.50 lakh crore, providing essential liquidity support.

This strategic borrowing plan sets the tone for fiscal stability and economic resilience as India navigates through the challenges and opportunities of the upcoming fiscal year.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions