The government's borrowing programme is "dynamic" and contingent on its cash position, a senior finance ministry official has clarified amid speculation over the Centre's upcoming weekly bond auction.
"This is a dynamic situation. Any borrowing which has to happen, we have to tell the market at least a couple of weeks in advance. At this point in time, we found that there was no necessity to borrow; the (cash) position was comfortable. So it's not something for which the answer can be given for what will happen on March 31. It is a dynamic situation," Economic Affairs Secretary Ajay Seth said on February 22.
"But let me assure you, there will not be any surprises for the market."
Seth was speaking to reporters in Mumbai following the conclusion of several meetings held by the finance ministry on the back of the 2022 Budget.
The Centre was scheduled to borrow Rs 95,000 crore from the market this month. However, it has so far raised only Rs 10,525 crore. The first bond auction of the month, held on February 4, saw the Reserve Bank of India (RBI) reject bids for two of the four bonds up for sale.
The subsequent two auctions, scheduled for February 11 and February 18, were cancelled following a review of the government's cash balance position.
"As far as these (cancelled) bond auctions are concerned, we did not find that there was a need to go to the market and raise the money," Seth said today.
The next weekly bond auction, slated to be held on February 25, will see the Centre look to raise Rs 23,000 crore. It is the last weekly bond auction of FY22, as per the calendar released in late September 2021.
The rejection of bids at the weekly bond auctions is usually seen as a signal of the yields the government and the RBI are not comfortable with. According to sources, the February 4 auction did not go through fully as market participants had demanded sharply higher interest rates from the government in light of the revelation made in the 2022 Budget that the Centre would borrow a record Rs 14.95 lakh crore from the market in FY23.
Explaining the government's decision to cancel the auctions scheduled for February 11 and February 18, the economic affairs secretary said other sources of financing the deficit - such as drawdown of cash balances, small savings collections, and revenue - also had to be considered.
"So when there is a need, the government borrows. When we find that there are enough cash balances, the need is not there, that activity is either not taken up or postponed," Seth said, adding that the government was committed to keeping the FY22 fiscal deficit within 6.9 per cent of the GDP.
Commenting on the government's efforts to get Indian government bonds included on global bond indices, Seth said conversations with relevant parties were ongoing, although the government's focus is on reviving growth.
"At this point of time, our focus is on stronger growth. Those decisions (inclusion of Indian government bonds on global bond indices) as and when taken will be informed. But I would like to clarify that when the conversation started on this (global bond indices), all those conditions which were needed to include government bonds on global indices are all have been met. Much, later on, has the taxation issue has been broadened. So all those conversations are still continuing... There is certainly no timeline on this."
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