India Economy - H2 FY25 Borrowing Elevated But See Scope For Modest Cut: Nirmal Bang

Nirmal Bang Report

The government has pegged H2 FY25 gross borrowing at Rs. 6.61 trillion or 47.2% of total. This is the highest since FY19. Net borrowing is pegged at Rs 4.95 trillion; up ~ 32.5%YoY.

Although G-sec issuances are elevated compared to previous years; T- bill borrowings are muted at Rs 2.47 trillion in Q3 FY25 versus 3.12 trillion in Q3 FY24.

The government has not announced any cut in the borrowing, yet there is a good chance that it could undershoot the budgeted Rs 14.01 trillion supported by elevated cash balances, healthy tax collections and slower spending. H1 FY25 gross borrowings could end at slightly less than the announced Rs 7.5 trillion (possibly ~Rs 7.2 trillion).

We see scope for a further rally in Indian G-secs supported by-

1. moderating global yields,

2. anticipated rate cuts by RBI and

3. favorable supply-demand dynamics with demand from both FPIs and domestic institutions.

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