NEW DELHI: The government has further scaled down its total borrowing for the current fiscal year, setting a ₹7.86 lakh crore target for the October-March period. Backed by strong tax collections that cut total planned borrowing by over ₹1.2 lakh crore, the strategy could signal stronger-than-budgeted tax revenues and ease pressure on bond yields.
However, economists caution that the lower borrowing calendar does not necessarily mean the government’s overall borrowing requirement has been reduced, as supplementary borrowing could still be undertaken later in the fiscal, depending on tax and non-tax revenues, disinvestment receipts and fiscal pressures.
On February 1, the Union Budget proposed total gross borrowing of ₹17.20 lakh crore. Since the Budget presentation, switches of G-Secs were conducted, reducing this amount to ₹16.09 lakh crore. Now, with the announcement of the second-half calendar, total borrowing will be over ₹15.99 lakh crore, including the plan for over ₹7.86 lakh crore during the October-March half.
According to sources in the Finance Ministry, net market borrowings (market borrowings for fiscal deficit financing) are kept at the budget levels, implying that, in spite of the incipient fiscal pressures, “Government is committed to the path of fiscal prudence laid out in the budget”. The sources added that the focus on the long end will help us increase the weighted average maturity (WAM), which had fallen during H1. “A longer WAM will help reduce the roll-over risk,” a source said, while adding that the government is managing its debt in the most prudent manner by resorting to switches/ buybacks, etc., and is aiding the market by not adding any additional pressure.
According to a Finance Ministry statement, borrowing during the second half of FY27 will be spread across securities with tenors of 3 years, 5 years, 7 years, 10 years, 15 years, 30 years, 40 years and 50 years.
Economists feel good tax momentum is one key reason for lower borrowing. Devendra Pant, Chief Economist, India Ratings & Research, said that the Union Government fiscal deficit during April-July 2026 was 26.8 per cent of FY27 (BE). Direct tax collection has remained strong in the first four months of the current fiscal; corporation tax and income tax grew 20.8 per cent and 24.3 per cent till July 2026.
“The weaker rupee has resulted in customs duties growing 38.2 per cent and limited degrowth of indirect tax to 0.5 per cent during 4MFY27. Strong growth momentum and expected higher nominal GDP growth in FY27 is expected to lead to higher direct tax growth. This, along with good non-tax revenue, is expected to translate into revenue receipts surpassing budgeted targets. Non-debt capital receipt (disinvestment and asset monetisation) is crucial from a receipt point of view,” Pant said.
Further, lower borrowing may give confidence to investors and is likely to have a favourable impact on bond yields (relatively lower). However, “the currency and inflation movement would continue to exert pressure on bond yields,” he said.
However, some economists are sceptical.
“The announced borrowing plan for 2026-27 does not necessarily imply that the budgeted amount of borrowing has been brought down. GoI can always undertake supplementary borrowing if the conditions warrant it, which will be known only towards the end of the fiscal year,” said D K Srivastava, Chief Policy Advisor, EY India. Also, much will depend on the inflow of tax, non-tax revenues and meeting the budgeted disinvestment targets, and a final picture will emerge only later during the year.
Source: The Hindu Business Line
