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India Could Increase Borrowing

INDIA

Indian markets return from a market holiday yesterday and bonds are expected to come under pressure There was a Bloomberg sources article which said India could have to increase borrowing again this year in order to compensate states for revenue losses due to a shortfall in consumption tax collection nationwide. According to the report the additional borrowing requirement is estimated at INR 1.58tn. A panel is set to meet on Friday to discuss the issue. If there was to be extra borrowing in-line with estimates it would mean total borrowing this fiscal year of INR 13.58tn. The RBI has already had to indulge market participants with various support/liquidity operations such as Operation Twist and the GSAP.

  • Forwards indicate USD/INR will open lower, 1-month NDF's have fallen to 73.13 from around 73.194 at the cash close on May 25 after a market holiday yesterday. There were reports yesterday that India is preparing a stimulus package to support the sectors worst hit by coronavirus and ensuing lockdowns. The finance ministry is said to be working on a package to support tourism, aviation and hospitality companies.

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