Reserve Bank governor Shaktikanta Das on Monday said lower government borrowings than market estimates will free more capital for the private sector resulting in the easing of inflation and bolstering growth. As inflation moderates, bond yields will also come down, he said.

“This year’s borrowing is lower than what initially the markets had expected. Lower quantum of borrowing means...it would ensure that much more resources will be available in the banking system to meet the requirements of the private sector,” Das said in Delhi. He was in New Delhi to attend an RBI board meeting.

Lower government borrowing is a growth-inducing measure as more credit will be available for the private sector to make their investments, he said.

Besides, he said, “lower quantum will help sort of stabilise inflation, how much stabilise I would not like to quantify. It should help in moderating inflation level”.

The lower-than-expected borrowing for 2024-25 comes amid India’s inclusion in JP Morgan’s Bond Index that is forecast to lead to billions of dollars of inflows into the nation’s debt markets and is expected to keep yields on the softer side.

Economists feel the central bank will start to look at an interest rate cut only in the second half of this calendar year and that any reduction will be a shallow one. Yields on the benchmark 10-year security on Monday settled at 7.097 per cent against the previous close of 7.11 per cent.

Sensex slumps

The benchmark BSE Sensex plunged 523 points on Monday due to profit-taking in metal and banking shares amid mixed trends in global markets.

The 30-share BSE Sensex settled 523 points or 0.73 per cent lower at 71072.49. The broader NSE Nifty also closed 166.45 points or 0.76 per cent lower at 21616.05.

Metal, banking and select oil shares succumbed to selling while pharma and IT shares bucked the trend.

“An uptick in exchange margin requirements caused a decrease in positions, primarily in mid and small caps. Aside from the pharma and IT sectors, selling was widespread, with notable struggles seen in PSU banks,” Vinod Nair, head of research, at Geojit Financial Services said.

In the Sensex pack, Tata Steel fell the most by 2.76 per cent, followed by NTPC (2.72 per cent) and SBI (2.26 per cent).