Center to Keep Gross Loans Below $196 Billion for 2023/24: Report

New Delhi:

The Indian government is likely to keep its gross market lending below 16 trillion rupees ($196 billion) for 2023/24 as it does not want to destabilize the bond market with negative surprises, two sources close to the deliberations said.

“Feedback from the market participants is that a loan of 15.5-16 trillion rupees in the next financial year can be well taken up,” one of the officials told Reuters.

The second official said that based on the conversations held within the government so far, the view has emerged that borrowing should be in line with market expectations.

The government has so far raised 12.93 trillion rupees till January 27, which is 91% of the total gross loan target of 14.21 trillion rupees in fiscal year 2022/23, which ends on March 31.

Traders await the Union budget due Feb. 1, with the government’s fiscal consolidation trajectory and its fiscal year 2024 lending calendar as the next trigger for market moves.

The government’s gross debt has more than doubled in the past four years as Prime Minister Narendra Modi’s government has spent heavily to protect the economy from the effects of the COVID-19 pandemic and provide relief to the poor.

India’s finance ministry did not immediately respond to an email and message asking for comment.

In a Reuters poll, economists predict that the government will borrow a record 16 trillion Indian rupees for higher infrastructure spending in the fiscal year to March 2024.

The poll also suggested that the government would reduce the budget deficit to 6.0% of GDP in 2023/24. It aims for a target of 4.5% by 2025/26.

The debt burden of federal and state governments is equivalent to 83% of annual gross domestic product (GDP), a ratio higher than that of many other emerging economies. The country’s sovereign credit rating is only a notch above junk levels.

The International Monetary Fund said last month that India needed a more ambitious fiscal consolidation plan to ensure debt sustainability over the medium term. The government says its current plan is already sufficient for the task.

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