The Government of India has announced its borrowing plan for the first half of fiscal year 2024-25, in collaboration with the Reserve Bank of India (RBI). The plan involves raising ₹7.50 lakh crore, which represents 53.08% of the total projected gross market borrowing of ₹14.13 lakh crore for the year, as per the Union budget.
Key Highlights:
- Introduction of a New 15-Year Security: Reflecting market feedback and global practices, a new 15-year dated security will be introduced.
- Diverse Maturity Spectrum: Borrowing will be diversified across securities with maturities ranging from 3 to 50 years.
- Weekly Auctions: The borrowing amount will be raised through 26 weekly auctions.
- Greenshoe Option: The government retains the greenshoe option to accept an additional ₹2,000 crore per security if needed.
- Treasury Bills Issuance: For Q1, weekly issuance of Treasury Bills is planned at ₹27,000 crore initially, followed by ₹22,000 crore, aiming for a net borrowing of ₹(-)3,000 crore for the quarter.
- Ways and Mean Advances (WMA) Limit: To manage temporary fiscal mismatches, the RBI has set the WMA limit at ₹1.50 lakh crore for H1.
[The greenshoe option, also known as an over-allotment option, is a clause in an initial public offering (IPO) that allows underwriters to sell more shares than initially planned. This can be up to 15% more shares within 30 days of the IPO if demand is higher than expected. It’s named after the Green Shoe Manufacturing Company, which first used this option. The greenshoe option helps stabilize the stock price post-IPO by allowing the underwriter to increase supply if necessary]
The borrowing plan for the first half of FY 2024-25 is a strategic move by the Government of India, primarily influenced by the need to manage the fiscal situation post-pandemic spending. The government aims to keep the gross market borrowing close to the previous fiscal year’s level, which had increased significantly due to the economic impact of the pandemic.
The introduction of new securities, like the 15-year tenor and Sovereign Green Bonds, is part of a broader strategy to diversify the borrowing and provide stability to the market. This approach also reflects a commitment to sustainable development through green financing. Additionally, the borrowing plan is designed to smoothen the redemption profile and manage temporary mismatches in government accounts, ensuring fiscal prudence and economic stability.
The detailed borrowing calendar, which includes the issuance of various dated securities and Treasury Bills, is intended to facilitate investment planning and ensure transparency in the Government Securities market. This careful planning is indicative of the government’s efforts to maintain a balanced approach between meeting immediate financial obligations and sustaining long-term economic health.
The funds raised through the Government of India’s borrowing program for FY 2024-25 are earmarked for several key areas to stimulate economic growth and development. Here’s how the funds are expected to be utilized:
- Capital Expenditure Outlay: The capital expenditure outlay for FY 2024-25 is set to increase by 11.1% to ₹11,11,111 crore. This is aimed at creating a multiplier effect on economic growth and employment.
- Infrastructure Development: A significant portion of the funds will go towards infrastructure projects, including converting 40,000 normal rail bogies to Vande Bharat standards, which is part of a larger initiative to modernize the country’s railway system.
- Healthcare Initiatives: The budget also allocates funds for healthcare initiatives, such as vaccination programs to prevent cervical cancer, reflecting the government’s focus on improving public health.
- Sustainable Development: The issuance of Sovereign Green Bonds (SGrBs) is part of India’s commitment to sustainable development, with proceeds likely to be used for financing green infrastructure projects.
- Economic Upliftment: The government has prioritized the upliftment of various segments of the population, including the poor, women, youth, and farmers, with specific allocations aimed at improving their economic conditions.
- Interest-Free Loans for Youth: A corpus of ₹1 lakh crore will be established for a scheme providing fifty-year interest-free loans to the youth, encouraging entrepreneurship and job creation2.
- Regional Development: Special attention is being given to the eastern region of India to make it a powerful driver of the country’s growth, with a high-powered committee formed to address demographic challenges.
These initiatives are part of the government’s broader strategy to maintain healthy macro-economic fundamentals and promote all-round, pervasive, and inclusive development. The borrowing plan is a critical component of this strategy, providing the necessary financial resources to support these ambitious goals.
For further information, the detailed press release can be accessed on the official websites of the Press Information Bureau, the Minister of Finance, and the Reserve Bank of India.