The government guided fiscal deficit of 3.2 per cent for 2017-18, less than the market expectation of 3.3 per cent, while the net borrowing would also be considerably lower than the present financial year.
Finance Minister Arun Jaitley said in his Budget speech that net borrowing would be at Rs 3.48 lakh crore, against the present financial year’s 4.07 lakh crore (after cancelling Rs 18,000 crore of auctions in January).
The Budget document showed gross Budget 2017 India borrowing would be Rs 5.8 lakh crore. Buyback would be to the tune of Rs 75,000 crore and redemptions would be Rs 1.56 lakh crore. The gross borrowing would be largely in line with the present financial year.
Bond market participants were happy with the borrowing plan and government’s commitment to keep deficits within check.
“We have to now give it to the government that they are serious about maintaining fiscal discipline,” said Jayesh Mehta, head of treasury at Bank of America Merrill Lynch.
Jaitley said that he would maintain fiscal deficit at 3 per cent from fiscal 2018-19 onwards.
Also, in the revised budget document for fiscal 2016-17, the government said it would buy back a further about Rs 22,500 crore in the present financial year. The government last week switched with the Reserve Bank of India Rs 37,000 crore of bonds maturing this financial year with longer tenure bonds. In the Budget for fiscal 2016-17, the government did not estimate any buyback/switch programme.