After Finance Minister Nirmala Sitharaman laid out the government’s numbers, markets quickly turned their focus to one key question: how much will the Centre borrow, and what does that mean for bonds and liquidity?
Chinoy said investors were hoping for a smaller borrowing figure. “The market is expecting a smaller borrowing number,” he said, pointing out that headline borrowing looked a bit higher than what some in the market had pencilled in.
That said, he noted there are still moving parts that could soften the picture later in the year. One factor is whether the Reserve Bank of India carries out a bond switch operation, which could help manage supply in the bond market. Another is small savings collections. If small savings come in higher than budgeted, the government may not need to borrow as much in the second half of the year.
On the broader fiscal math, Chinoy did not see major surprises. The fiscal deficit number is close to what markets were already expecting. While some estimates were around 4.2% of gross domestic product, the Budget figure is closer to 4.3%. “No real surprises there,” he said.
Where things could get more interesting is on growth assumptions. Chinoy said nominal gross domestic product growth is a key variable for revenue projections. If nominal growth reaches the assumed 10% next year, tax revenue targets may be achievable. But if growth turns out to be lower, the revenue math could become tighter.
He also flagged capital expenditure trends. Growth in public capex may look modest in the near term because last year’s base was high. Over two years, spending has still risen strongly, but Chinoy said the bigger message is that the Centre has already done much of the heavy lifting. “Private capex pick up to fill in some of that gap,” he said, stressing that private sector investment will now have to play a bigger role.
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