India's higher govt borrowing may be offset by lower state debt supply in H2 - ICICI Securities
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Indian government's potential higher borrowing in the second half of this financial year could be offset by lower debt issuance by states, ICICI Securities Primary Dealership said.
"The sharp fall in states' borrowing will more than offset the rise in centre's dated borrowing, economists Prasanna A and Abhishek Upadhyay said in a note on Friday.
"In that sense, total SLR (Statutory Liquidity Ratio)borrowing would be lower than what was anticipated during the budget," economists Prasanna A and Abhishek Upadhyay said in a note.
India aims to borrow 14.31 trillion Indian rupees ($179.25 billion) on a gross basis through sale of bonds in this financial year, of which 5.86 trillion rupees is set for October-March.
The primary dealership however expects the government to revise its gross borrowing to 15.10 trillion rupees for the year, potentially leading to an additional debt supply of around 800 billion rupees.
It however expects states to borrow less than what was expected as per their budget estimates
The dealership predicts states' gross borrowing to touch 6.8 trillion rupees, 2.1 trillion rupees lower than its estimate at the time of state budgets. "Thus, the fall in states' borrowing creates space for extra borrowing by centre," the note said.
India is likely to announce its borrowing schedule by end of this month, while states announce quarterly calendar.
States have borrowed only around 2.39 trillion rupees so far in this financial year, against schedule of 3.58 trillion rupees.
The narrow state development loans spread over government securities could sustain into the second half, it said. "We think these trends should unfold regardless of news about inclusion of Indian bonds in global bond indexes," the economists said.
The note however added, the news of extra borrowing from centre could come later as a lot of the incremental revenue spend is lumpy and back-ended, and may not occur till January-March.
"The likelihood of extra borrowing is riding on a binary event i.e., extension or discontinuation of the free foodgrains
scheme."
