Government’s ₹8 Trillion Borrowing Plan for FY26

March 29, 2025

The Government of India has announced borrowing plan for the first half of the financial year 2025-26. The plan involves raising ₹8 trillion from the market, constituting 54% of the total borrowing target of ₹14.82 trillion. This initiative includes the issuance of ₹10,000 crore in sovereign green bonds. The borrowing will occur through 26 weekly auctions, impacting fiscal management and market liquidity.

Breakdown of Borrowing Strategy

The government will issue securities across various maturities. The allocations are as follows – 3-year (5.3%), 5-year (11.3%), 7-year (8.2%), 10-year (26.2%), 15-year (14%), 30-year (10.5%), 40-year (14%), and 50-year (10.5%). The 10-year securities will be allocated every fifth week, adjusting to market needs.

Sovereign Green Bonds

A notable aspect of this borrowing is the introduction of sovereign green bonds. The government plans to raise ₹10,000 crore through this initiative, aimed at financing environmentally sustainable projects. This move aligns with global trends towards green finance.

Weekly Auctions and Treasury Bills

The borrowing will take place through weekly auctions. In the April-June quarter, the government expects to issue ₹19,000 crore in treasury bills. This comprises ₹9,000 crore in 91-day T-bills, ₹5,000 crore in 182-day T-bills, and ₹5,000 crore in 364-day T-bills.

Management of Government Debt

To manage its debt effectively, the government employs strategies like buybacks and bond switches. Buybacks involve retiring existing bonds to reduce outstanding debt. Bond switches replace shorter-duration bonds with longer ones, smoothing the redemption profile.

Ways and Means Advances

The Reserve Bank of India has set the Ways and Means Advances limit for the first half of FY26 at ₹1.5 trillion. This facility helps the government manage temporary cash flow mismatches. It provides short-term credit to ensure liquidity in government accounts.

Fiscal Deficit Targets

The government has set a fiscal deficit target of 4.4% for FY26, slightly better than the previous year’s estimate. The fiscal deficit is projected at ₹15.6 trillion. This plan aims to reduce the central government’s debt to 50% of gross domestic product by March 31, 2031.

Market Impact

This borrowing strategy will influence interest rates and market liquidity. A slight softening of around 2 basis points in benchmark bond yields is anticipated. The government’s borrowing plan is crucial for fiscal management, impacting overall economic stability.

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