India plans to retain market borrowing target after tax cuts

India plans to keep its borrowing program unchanged for the second half of the financial year and absorb any revenue losses from recent consumption tax cuts, according to people familiar with the matter.

New Delhi won’t cut capital expenditure and remains on track to meet its fiscal deficit target of 4.4% of gross domestic product for the year ending March 2026, the people said, asking not to be identified as they aren’t authorized to speak publicly. The government is expected to finalize its borrowing plan for the October–March period later this month, with 6.8 trillion rupees ($77 billion) currently budgeted.

A finance ministry spokesperson didn’t reply to an email seeking comment.

India saw its biggest bond selloff in three years in August after Prime Minister Narendra Modi announced a cut in consumption taxes, a move expected to cost 480 billion rupees in revenue. While yields eased last week, and Finance Minister Nirmala Sitharaman pledged to stick to the fiscal deficit target, traders are still concerned about any increase in debt supply.