A day after the Reserve Bank of India (RBI) took a step to improve liquidity for banks, the Union government chipped in by cutting its borrowing target for the second half of this year. The move will see gross market borrowing come down by Rs 70,000 crore during this fiscal.

The announcement, which is likely to cool down bond yields when trading resumes on Monday, is expected to have a positive impact on system liquidity.

Economic affairs secretary S.C. Garg announced the reduction in the gross borrowing estimate in New Delhi on Friday.

Giving details about the borrowing programme for the second half of the fiscal, he said the government would borrow Rs 2.47 lakh crore in the October-March period compared with Rs 2.88 lakh crore during April-September of 2018-19. While the government had budgeted a gross borrowing programme of Rs 6.05 lakh crore for the whole year, this stands reduced to Rs 5.35 lakh crore.

The Centre will also launch inflation-indexed bonds, the secretary said, adding that one or two bond issues would come in the current fiscal.

Telegraph infographic

“Fiscal management (is) completely on track. We have reduced borrowing... against Rs 2.88 lakh crore, we will be raising only Rs 2.47 lakh crore,” Garg said. He added that the cut in borrowing will be matched by enhanced flow from small savings schemes. The government resorts to market borrowings to bridge the fiscal deficit.

Garg said the government was confident of meeting its revenue collection target as projected in the budget and there was no need to revise the fiscal deficit target of 3.3 per cent of GDP.

Bond market circles expect government security prices to rally on Monday. Yields are inversely related to G-Sec prices.

The benchmark 10-year yield on Friday closed at 8.02 per cent and it is now likely to open below the 8 per cent level.

The RBI subsequently released the calendar for issuance of government securities where Rs 11,000-12,000 crore will be raised every week beginning October 1 till March 8, 2019.