Govt announces Rs 17.2 lakh crore gross market borrowing programme

MUMBAI: The government will step up market borrowings to a record Rs 17.2 lakh crore (gross) in 2026-27, finance minister Nirmala Sitharaman said in her Budget speech on Sunday, even as bond yields have hardened in recent months amid heavy borrowing by the Centre and states.Of the gross borrowing, net market borrowing has been pegged at Rs 11.7 lakh crore, which is in line with market expectation. The gap of about Rs 5.5 lakh crore between gross and net borrowing reflects repayment of earlier debt, either on maturity or through switching of existing securities into more liquid bonds. Government bond yields have edged higher over the past few months as the supply of paper has outpaced demand, with large issuances by the Centre and state governments weighing on the market. Analysts said the elevated borrowing programme could keep yields firm, especially if inflation risks persist.Government borrowing is a key component of the Union Budget and is used to bridge the gap when tax and non-tax revenues fall short of expenditure needs. Funds are raised mainly through the issuance of government securities and Treasury Bills, which are treated as capital receipts and help finance welfare schemes, infrastructure spending and other public services.According to economists, besides the size of the borrowing the quality of expenditure also matters for the market. If the money goes into capital investment it is more positive for the market. “This budget has proposed a capital expenditure of Rs 12.10 lac crore which is more than the net market borrowing of Rs 11.70 lac crore. I pray that a path is laid where one day capital expenditure will be more than the total borrowing including small savings,”said Nilesh Shah, Managing Director, Kotak Mahindra AMCHigher borrowing, however, adds to the interest payment burden and directly impacts the fiscal deficit, reducing room for future spending. When borrowing exceeds planned levels, interest commitments rise, putting pressure on public finances and complicating efforts to adhere to fiscal consolidation targets.India follows a structured borrowing calendar, with the first half of the borrowing plan announced in the Budget and the second phase typically starting around September or October. Issuances are spread over weekly auctions across maturities ranging from three to 40 years. State governments, meanwhile, borrow on a quarterly basis.The borrowing programme is overseen by the finance ministry’s Department of Expenditure in coordination with the Reserve Bank of India, which finalises the auction schedule and issuance details.Ahead of the Budget, the government had also sought Parliament’s approval for additional spending in the current fiscal, signalling continued reliance on borrowing to support expenditure even as it seeks to balance growth priorities with fiscal discipline.