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Informist, Monday, Sept. 22, 2025

 

NEW DELHI – Indian bond market gives a good opportunity to investors at the current 10-year level but there is still scope for bond yields to go down, Chief Economic Adviser to the government V. Anantha Nageswaran said. "The 10-year bond yield went to 6.6% but we are now hovering around 6.5% or 6.45%, I think there is still room for it to go down, and it will go down," Nageswaran told news channel CNBC-TV18 at "Reforms Reloaded" Summit on Monday.

 

The 10-year benchmark gilt yield rose to 6.66% on Aug. 26, its highest in the current fiscal year started April. The spike was due to concern over the Centre's potential fiscal expansion and slippage after announcing the GST reforms, heavy state bond supply, lack of demand from long-term investors and a view that the Reserve Bank of India's Monetary Policy Committee would not cut rates further.

 

Nageswaran said the government was confident of maintaining the fiscal deficit for 2025-26 (Apr-Mar) and keeping the second half market borrowing unchanged. The government is expected to release its Oct-Mar borrowing calendar later this month. "We are confident that the final number will be 4.4% of GDP. Overall revenue growth is on track in comparison to last year's number," he said.

 

He also expressed confidence about the inflation trend being benign until the end of next calendar year. "Assuming it is a normal monsoon (in 2026), I think then we are looking at fairly benign inflation until the end of next calendar year," he told the news outlet.

 

On the recent decision of GST Council to overhaul the indirect tax regime by collapsing the four-slab GST structure of 5%, 12%, 18%, and 28% to a two-slab structure of 5% and 18%, Nageswaran said the move will boost domestic demand as it will increase the spending capacity of households. "GST 2.0 is a significant landmark reform, I'm very confident that under the circumstances it will provide a very significant boost to domestic demand because if you look at the total number of taxes that is estimated to be foregone is the exact amount of saving that the households are making coming on top of the direct tax concessions made in the Budget," he said.

 

The GST rate cut will have a multiplier effect and will definitely add quite a bit to the GDP numbers, he said at the event. "We have given a range 6.3-6.8% in real terms. I'm more comfortable in saying that we will be tending towards the upper end of this range rather than the lower range of this, considering what is happening on the external front. But once the second quarter number comes, then we will revisit the estimates," he said.

 

Nageswaran said whenever the effective GST rate is brought down, the annual average collection actually grew. "So you already have a track record where the reduction in effective GST rate does not result in a decline in GST revenues. Rate reductions have led to more formalisation rather than less formalisation and that means more revenues," he said.

 

He is also hopeful that the GDP for Jul-Sept will be closer to 7%. "From whatever we have seen in the first two months of July and August the second quarter numbers look very encouraging. We may be getting closer to the 7 handle even for second quarter notwithstanding the tariff that came into effect from August third week onwards," he said. India's GDP grew at a five-quarter high pace of 7.8% in the June quarter. This was 130 bps higher than the RBI's forecast of 6.5%.  End

 

 

Compiled by Sagar Sen

Filed by Akul Nishant Akhoury

 

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