In H2 of the fiscal year that ends March 31, 2027, the government intends to borrow 7.9 trillion rupees. Within that amount, the share of three-to-five-year securities will drop to 19% versus 23.5% in the first half, while bonds of 30 years or more are expected to increase to 28% from 24.9%.
Anuradha Thakur, secretary at the Department of Economic Affairs, said scaling back shorter-dated supply reflects the central bank's sales of similar tenors as it drains liquidity. The Reserve Bank of India said it will sell 1 trillion rupees of bonds to drain excess liquidity, after taking in a record $133 billion from diaspora deposits through a concessional program meant to support the rupee.
The extra long-end supply caught some by surprise, but the shift leaves more room at the short end to absorb the RBI's operations, said Abhishek Upadhyay, economist at ICICI Securities Primary Dealership. "That's because there are expectations of the RBI soon coming out with more bond sales to drain liquidity and those operations are typically concentrated at the short end," he said.
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From April to September, India had planned to borrow 8.2 trillion rupees, within a revised full-year gross program totaling 16.09 trillion rupees. The gross program has now been trimmed to 15.99 trillion rupees. Net market borrowing remains at the budgeted level, signaling commitment to the fiscal prudence path outlined in the budget despite emerging strains, Thakur said. Higher crude prices amid the Middle East conflict have pressured public finances through lower revenues and a larger subsidy bill.
The record second half supply is likely to keep pressure on government bonds, already weighed down by rising inflation and the RBI's liquidity withdrawal. States also tend to bunch their borrowing late in the year, which could add to the load. India's benchmark 10-year yield has risen by 27 basis points in the last month as traders price in a potential hike and continued liquidity withdrawal.
More government bond supply and tighter cash conditions usually point to higher yields and choppier prices. If you hold Indian bond funds or are eyeing fixed returns, the government's issuance pace and the RBI's liquidity moves will shape the rates you get.
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