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Informist, Sunday, Feb. 1, 2026

--BUDGET: FY27 net market borrowing pegged at INR 11.7 tln 

--BUDGET: FY27 gross market borrowing pegged at INR 17.2 tln 

--BUDGET: FY26 net market borrow INR 11.33 tln vs INR 11.54 tln Budget aim 

--BUDGET:FY26 gross mkt borrow seen INR 14.61 tln vs INR 14.82 tln Budget aim 

--BUDGET: FY27 net short-term borrowing pegged at INR 1.30 tln 

--BUDGET: FY26 net short-term borrowing seen nil

--BUDGET: FY27 borrowing from small savings seen at INR 3.87 tln 

MUMBAI/NEW DELHI – The government will borrow INR 17.20 trillion through the sale of dated securities on a gross basis in 2026-27 (Apr-Mar), up from a revised estimate of INR 14.61 trillion in FY26. The revised estimate for the current fiscal year is adjusted lower from INR 14.82 trillion in the Budget estimate.

On a net basis, the government will sell bonds worth INR 11.73 trillion, which accounts for repayments worth INR 5.47 trillion, according to the Budget for FY27 presented by Finance Minister Nirmala Sitharaman in the Lok Sabha Sunday. The net issuance is higher than the revised estimate of INR 11.33 trillion and the budgeted INR 11.54 trillion for FY26. Net borrowing will fund 69.18% of the projected fiscal deficit of INR 16.96 trillion, or 4.3% of GDP, in FY27. The revised estimate for FY26 is retained at 4.4% of GDP, the same as the budget estimate.

The Budget receipts section showed that the government will not reduce its redemptions by tapping the Goods and Services Tax compensation fund. It has used INR 2.69 trillion from the GST compensation fund since FY24 to reduce its scheduled redemptions, including INR 675 billion in the FY26 Budget. The compensation cess will be discontinued from Sunday and any excess collections in the fund are likely to be distributed between the Centre and states.

According to an Informist poll of 30 economists, fund managers, and treasury heads, the government was seen targeting net issuance of dated securities at INR 11.60 trillion in FY27. The Centre was expected to announce a gross borrowing of INR 16.30 trillion through dated securities, according to the median of the poll.

The government has already completed a large part of its borrowing programme for FY26, with significant support from the Reserve Bank of India's gilt purchases through open market operations, including auctions and the secondary market, totalling around INR 7 trillion. It has borrowed INR 13.07 trillion through gilts so far this year, or 89.5% of the revised target. The RBI has rejected bids at the green bond and seven-year gilt auctions so far this financial year, likely leading to a downward revision in its borrowing target. There have been no devolvements of government bonds on underwriters since January 2025.

In the revised estimate for FY26, dated securities are set to finance 72.7% of the Centre's fiscal deficit through borrowing, but accounting for buybacks for FY27 bonds worth INR 867.75 billion, the borrowing will finance only 67.1% of the deficit. The Centre's cash drawdown in the next fiscal is projected at INR 327.02 billion from the revised estimate of INR 457.22 billion in FY26. The Budget estimate for cash drawdown was 24.84 billion in FY26.

Borrowing from small savings is pegged at INR 3.87 trillion in FY27, funding 22.8% of the fiscal deficit. The revised estimate for borrowing from small savings is INR 3.72 trillion, funding 23.9% of the deficit in FY26.

Net short-term borrowing through the issuance of 14-day, 91-day, 182-day, and 364-day Treasury bills is budgeted at INR 1.30 trillion for the next financial year, compared with nil net short-term borrowing in FY26. Both the FY26 Budget estimate and the FY26 revised estimate for net short-term borrowing were nil.

The Budget also provided for issuing up to INR 500 billion in cash management bills and borrowing up to INR 5.00 trillion from ways and means advances, though the net amount for both is nil.

The government has made no provision to buy back government bonds in FY27, though it has conducted such operations in the last two financial years. So far in FY26, the government has bought back around INR 867.75 billion of gilts maturing in FY27 through a series of auctions in June and July.

Meanwhile, the government aims to switch INR 2.50 trillion bonds in the next fiscal year, higher than the revised estimate of INR 1.64 trillion for FY26. A switch operation entails replacing a security maturing in the near term with a longer-maturity paper, effectively postponing the government's debt repayment. Analysts had estimated gilt switches for FY27 would be similar to the budgeted INR 2.50 trillion for FY26, which was met using switches and buybacks. 

The government bond market is shut Sunday, but gilt yields are expected to rise Monday after the gross borrowing figure for FY27 exceeded most market participants' expectations. The 10-year gilt yield was little changed Friday at 6.70%, near its highest level this fiscal year. It is seen rising to 6.75-6.80% Monday. However, traders are hoping the government will switch the RBI's holdings of bonds maturing in FY27, estimated at INR 700 billion to INR 950 billion, which could sharply bring down gross borrowing. 

The following are key details of the government's proposed borrowing programme. All amounts in INR billion.

End

Reported by Cassandra Carvalho and Aaryan Khanna

Edited by Saji George Titus

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