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India Said to Plan 250 Billion Rupees Additional Borrowing

November 05, 2012

India’s government may consider borrowing an extra 250 billion rupees ($4.6 billion) after setting a higher budget deficit target for the year ending March 31, said two Finance Ministry officials with direct knowledge of the matter.

The ministry will decide by the end of January or early February if it will raise the additional amount by selling government securities or treasury bills, the two people said, asking not to be identified as they aren’t authorized to speak on the subject. Finance Minister Palaniappan Chidambaram has vowed to cap the deficit at 5.3 percent of gross domestic product for the 12 months through March, versus an earlier target of 5.1 percent proposed by his predecessor.

India plans to raise 2 trillion rupees in the second half of the fiscal year, Economic Affairs Secretary Arvind Mayaram told reporters in New Delhi on Sept. 27, leaving the target unchanged for the whole year at 5.69 trillion rupees.

The nation’s budget deficit is the widest among major emerging economies as slower growth hurts tax receipts and subsidies fan spending, imperiling the government’s goal of narrowing the gap from 5.8 percent last year. Officials boosted diesel prices on Sept. 14 to restrain expenditure on compensation for below-cost sales.

Standard & Poor’s and Fitch Ratings reduced the outlook on India’s credit rating to negative from stable earlier this year, bringing the nation a step closer to junk status, citing fiscal and current-account imbalances.

Trimming Subsidy

The benchmark 8.15 percent note due June 2022 reversed earlier gains, with the yield touching 8.21 percent versus the day’s low of 8.18 percent, according to the central bank’s trading system. The rate was little changed from Nov. 2 at 8.20 percent as of 3:27 p.m. in Mumbai.

The 10-year yield has declined 34 basis points since the end of March. The rupee has weakened almost 7 percent in the same period, Asia’s worst, and was at 54.565 a dollar.

Sovereign-debt issuance will exceed the target for the year ending March 31 by 500 billion rupees, according to the median of eight estimates compiled by Bloomberg in September.

The Department of Economic Affairs estimates the revenue shortfall for the year ending March 31 at 200 billion rupees, while the revenue department says it could be 600 billion rupees, Bloomberg TV India reported today, citing people it didn’t identify.

Prime Minister Manmohan Singh is trying to trim a subsidy bill for food, fuel and fertilizer by 12 percent to 1.9 trillion rupees in the year through March 2013. The government also aims to raise 300 billion rupees from share sales by state companies.

The disinvestment program and a push to step up tax collection will be the key to meeting the goal of 5.3 percent of GDP, the two people said.

To contact the reporters on this story: Siddhartha Singh in New Delhi at

To contact the editor responsible for this story: Sam Nagarajan at

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