Rakshit said liquidity conditions have tightened temporarily, while Shailendra Jhingan, Head of Treasury and Economic Research at ICICI Bank, pointed out that “Core liquidity is still at a very huge surplus of 5 trillion (lakh croer).” Both indicated that open market operations (OMOs) could come later if needed.
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The government is expected to borrow ₹6.82 lakh crore in the second half of the fiscal year 2025-26 (FY26), after raising ₹8 lakh crore in the first half. Rakshit said, “We don’t expect it to be more than 6.8 trillion (lakh crore). They will manage it,” while Jhingan said the government has buffers such as higher small savings and the RBI dividend to prevent slippage.
Jhingan said inflation is running well below the RBI’s 4% target. “Our target for the current average inflation is 2.4%,” he said, adding that even excluding vegetables, inflation stands at 3.7% after goods and services tax (GST) cuts. According to him, core inflation could fall to 3%, creating “scope to cut rates.”
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On growth, Jhingan projected real gross domestic product (GDP) at 7% this year but warned of slowing nominal growth. “In the fiscal year 2022-23 (FY23), nominal GDP growth was 14%. It came down to 12% in 2023-24 (FY24), 9.7% in 2024-25 (FY25) and this year we expect 8.5%,” he said, stressing that policymakers should watch the trend closely as it affects debt sustainability and profit growth.
Both agreed that demand for long-tenure bonds has weakened. Jhingan noted that institutional investors are allocating more to equities, while Rakshit said some supply may shift to the five-to-seven-year bucket, which could “bring in a little bit of demand” and ease yields.
For the full interview, watch the accompanying video
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