Indian bonds rallied on Friday on optimism that the government will soon take steps to ease a jump in bond yields after word spread that the interim finance minister had met a handful of bankers and analysts to seek feedback on the economy.

In the meeting held late on Thursday, Piyush Goyal allayed concerns around India's fiscal deficit and rising inflation, and sought feedback on massive losses in banks' bond holdings, two participants who attended the meeting told Reuters.

Goyal wanted to know ways in which the government could help banks reduce the trading losses on their bond portfolios due to soaring yields, one of the participants said.

Some of the suggestions from the participants included issuance of floating rate bonds and bond buybacks by the government, he said.

Indian bonds have weakened to multi-year lows as global oil prices surged, causing yields to spike above 8 per cent.

The benchmark 10-year bond yield opened at a three-year high of 8.033 per cent on Friday, on worries over further rate hikes and a potentially higher fiscal deficit. However, by 0750 GMT the yield had eased to 7.92 percent.

On Wednesday, the country's central bank raised its key policy rate for the first time in four years, citing growing inflation worries due to a steep spike in oil prices and a weakening rupee.

The hike - the first since Prime Minister Narendra Modi came to power - could not have come at a worse time for a government grappling with spending constraints, voter discontent in the rural heartlands and rising oil prices.

Goyal assured the government would stick to its fiscal deficit target of 3.3 per cent, responding to concerns over fiscal slippage ahead of an election year, according to one of the participants.

The minister also said that the government's proposed plan to buy food grains at a minimum price from farmers would not be inflationary.

Goyal, who is currently the railway minister, has taken additional charge of the finance ministry temporarily until Arun Jaitley recovers after undergoing a kidney transplant.

"He was just seeking feedback and we do not know whether the government will implement any of these steps or not," another participant at the meeting told Reuters.

Piyush Goyal allayed concerns around India's fiscal deficit and rising inflation

Indian bonds rallied on Friday on optimism that the government will soon take steps to ease a jump in bond yields after word spread that the interim finance minister had met a handful of bankers and analysts to seek feedback on the economy. In the meeting held late on Thursday, Piyush Goyal allayed concerns around India's fiscal deficit and rising inflation, and sought feedback on massive losses in banks' bond holdings, two participants who attended the meeting told Reuters. Goyal wanted to know ways in which the government could help banks reduce the trading losses on their bond portfolios due to soaring yields, one of the participants said. Some of the suggestions from the participants included issuance of floating rate bonds and bond buybacks by the government, he said. Indian bonds have weakened to multi-year lows as global oil prices surged, causing yields to spike above 8 per cent. The benchmark 10-year bond yield opened at a three-year high of 8.033 per cent on Friday, on worries over further rate hikes and a potentially higher fiscal deficit. However, by 0750 GMT the yield had eased to 7.92 percent. On Wednesday, the country's central bank raised its key policy rate for the first time in four years, citing growing inflation worries due to a steep spike in oil prices and a weakening rupee. The hike - the first since Prime Minister Narendra Modi came to power - could not have come at a worse time for a government grappling with spending constraints, voter discontent in the rural heartlands and rising oil prices. Goyal assured the government would stick to its fiscal deficit target of 3.3 per cent, responding to concerns over fiscal slippage ahead of an election year, according to one of the participants. The minister also said that the government's proposed plan to buy food grains at a minimum price from farmers would not be inflationary. Goyal, who is currently the railway minister, has taken additional charge of the finance ministry temporarily until Arun Jaitley recovers after undergoing a kidney transplant. "He was just seeking feedback and we do not know whether the government will implement any of these steps or not," another participant at the meeting told Reuters.

Indian bonds rally on hopes government will bolster markets

India will meet its fiscal deficit target of 3.5 per cent of GDP for the 2017/18 fiscal year which ends in March, Economic Affairs Secretary Subhash Chandra Garg said on Thursday.

"Quite confident that fiscal deficit will be within 3.5 per cent of GDP," the top finance ministry official said.

On Wednesday, India reported a fiscal deficit of 7.2 trillion rupees ($110.42 billion) for April-February, which was 120.3 percent of the budgeted target for the current fiscal year.

The economic affairs secretary said that the government now had preliminary numbers till March 28 which indicated that it was "very close" to the revised fiscal and revenue deficits for the current fiscal year. 
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Fiscal accounts numbers released yesterday indicated end February position. We now have flash numbers until 28th March. We are very close to RE estimates for both Fiscal Deficit and Revenue Deficit. Quite confidant that FD will be within 3.5% of GDP.
— Subhash Chandra Garg (@SecretaryDEA) <a href="https://twitter.com/SecretaryDEA/status/979212090253725696?ref_src=twsrc%5Etfw">March 29, 2018</a></blockquote>
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(With inputs from Reuters) 
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The economic affairs secretary said that the government now had preliminary numbers till March 28 which indicated that it was 'very close' to the revised fiscal and revenue deficits for the current fiscal year

India will meet its fiscal deficit target of 3.5 per cent of GDP for the 2017/18 fiscal year which ends in March, Economic Affairs Secretary Subhash Chandra Garg said on Thursday. "Quite confident that fiscal deficit will be within 3.5 per cent of GDP," the top finance ministry official said. On Wednesday, India reported a fiscal deficit of 7.2 trillion rupees ($110.42 billion) for April-February, which was 120.3 percent of the budgeted target for the current fiscal year. The economic affairs secretary said that the government now had preliminary numbers till March 28 which indicated that it was "very close" to the revised fiscal and revenue deficits for the current fiscal year. Fiscal accounts numbers released yesterday indicated end February position. We now have flash numbers until 28th March. We are very close to RE estimates for both Fiscal Deficit and Revenue Deficit. Quite confidant that FD will be within 3.5% of GDP. — Subhash Chandra Garg (@SecretaryDEA) March 29, 2018 × (With inputs from Reuters)

On course to meeting fiscal deficit target: Top finance ministry official

India set its fiscal deficit target for the year starting in April at 3.3 percent of gross domestic product, Finance Minister Arun Jaitley said on Thursday while unveiling the government`s annual budget.

Most analysts had expected the 2018/19 to be set at 3.2 percent of GDP. The deficit target for the year ending in March 2018 was also revised to 3.5 percent of GDP.

Comments&nbsp;

Arun Singh, lead economist, Dun &amp; Bradstreet, Mumbai

&quot;This is one of the most populist budgets. If the government means to implement all the social, rural and infrastructure expenditure plans at very small changes on the tax front, I certainly have some concerns for the fiscal deficit target for the next year.

&quot;We have seen inflation coming up in the last couple of months. An increase of the minimum support price for some of the crops has the potential to increase inflation rate going forward. I don`t see scope for an RBI rate cut.&quot;

Rajeev Singh, Partner, Deloitte India, Delhi

&quot;Increased allocation for infrastructure projects such as national highways and Bharat Mala project in the union budget should give much-needed push to the (auto) sector especially medium and heavy commercial vehicles. Good rural focus will primarily help to boost retail growth in the rural market and thereby bring more growth in the auto industry.&quot;&nbsp;

Rajan S. Mathews, Director General, Cellular Operators Associations of India, Delhi&nbsp;

&quot;Things like hot spots for rural areas, investment in Bharat Net, fibre connectivity, emphasis on artificial intelligence - all of those go forward as positive in terms of pushing forward the `Digital India` programme. However, disappointment lies in the fact that although resources are being allocated for infrastructure such as railways, the most important infrastructure element, digital highway, that is going to allow the digital economy to flourish, was unaddressed.&quot;&nbsp;

&quot;We remain disappointed that the concerns of the telecom industry with regard to financial help, reduction of levies, reduction of duties were not addressed.&quot; 
Rupe Rege Nitsure, Group Chief Economist, L&amp;T Financial Services, Mumbai

&quot;While the budget indicates a pause in fiscal consolidation, its countercyclical measures augur well for growth. Increased emphasis on agriculture, rural and MSME (medium and small enterprise) sectors is most appropriate, as these sectors had suffered most due to demonetisation and GST. If implemented well, this budget carries the promise of reviving the economy in FY2019.&quot;

Padma Priya J, Director, Grant Thornton India LLP, Bengaluru

&quot;Infrastructure sector got a further boost through increased allocations. Thrust on large infrastructure schemes and projects continue with rail and road sector getting an all-time high allocation, but the announcement to rationalise key linkages including `coal for power` and `power for rail` seems to be an important move.&quot;&nbsp;

&quot;The industry did expect some drastic measures to revive the private sector participation and improving operational efficiencies in the sector, but this has not been addressed.&quot;

Radhika Rao, Group Economist, DBS, Singapore&nbsp;

&quot;Overall measures have very strong social sector emphasis, which covers agricultural and rural sectors all the way to health and education sectors. Simultaneously, there is focus on infrastructure as well.&quot;

&quot;As early as Aug-Sept last year, as the fiscal numbers were coming in, we were expecting a slippage in this target. But it has panned out. The bond market had expected fiscal slippage, I think it has not been as wide as feared.&quot; 
&quot;Divestment is expected to be much better than targeted for the first time in many years.&quot;

Sujan Hajra, Chief Economist, Anand Rathi Securities, Mumbai

&quot;We were expecting (fiscal deficit of) 3.4 percent for the current year and 3.2 percent for the next year, and these announcements are slightly higher than expected. This is slightly negative for bond markets.&quot;&nbsp; 
&quot;The long-term capital gain is a singular negative thing for the stock markets.&quot;

&quot;With the agrarian crisis and unemployment situation, these kinds of policies are expected with or without elections.&quot;&nbsp;

Shilan Shah, India Economist, Capital Economics, Singapore

&quot;It was no surprise to us that they relaxed the deficit targets. It looks like the BJP is aiming to shore up support among rural voters, there have been plenty of measures announced to boost the rural economy. These are quite trademark&nbsp;things ahead of an election.&quot;&nbsp;

&quot;In cumulative terms, the deficit has already overshot the previous target, it had to be revised up, but it does need to demonstrate some kind of fiscal prudence. The deficit this year will be same as last year, I don`t think that comes as a surprise.&quot;&nbsp;

"Things like hot spots for rural areas, investment in Bharat Net, fibre connectivity, emphasis on artificial intelligence - all of those go forward as positive in terms of pushing forward the `Digital India` programme.

India set its fiscal deficit target for the year starting in April at 3.3 percent of gross domestic product, Finance Minister Arun Jaitley said on Thursday while unveiling the government`s annual budget. Most analysts had expected the 2018/19 to be set at 3.2 percent of GDP. The deficit target for the year ending in March 2018 was also revised to 3.5 percent of GDP. Comments Arun Singh, lead economist, Dun & Bradstreet, Mumbai "This is one of the most populist budgets. If the government means to implement all the social, rural and infrastructure expenditure plans at very small changes on the tax front, I certainly have some concerns for the fiscal deficit target for the next year. "We have seen inflation coming up in the last couple of months. An increase of the minimum support price for some of the crops has the potential to increase inflation rate going forward. I don`t see scope for an RBI rate cut." Rajeev Singh, Partner, Deloitte India, Delhi "Increased allocation for infrastructure projects such as national highways and Bharat Mala project in the union budget should give much-needed push to the (auto) sector especially medium and heavy commercial vehicles. Good rural focus will primarily help to boost retail growth in the rural market and thereby bring more growth in the auto industry." Rajan S. Mathews, Director General, Cellular Operators Associations of India, Delhi "Things like hot spots for rural areas, investment in Bharat Net, fibre connectivity, emphasis on artificial intelligence - all of those go forward as positive in terms of pushing forward the `Digital India` programme. However, disappointment lies in the fact that although resources are being allocated for infrastructure such as railways, the most important infrastructure element, digital highway, that is going to allow the digital economy to flourish, was unaddressed." "We remain disappointed that the concerns of the telecom industry with regard to financial help, reduction of levies, reduction of duties were not addressed." Rupe Rege Nitsure, Group Chief Economist, L&T Financial Services, Mumbai "While the budget indicates a pause in fiscal consolidation, its countercyclical measures augur well for growth. Increased emphasis on agriculture, rural and MSME (medium and small enterprise) sectors is most appropriate, as these sectors had suffered most due to demonetisation and GST. If implemented well, this budget carries the promise of reviving the economy in FY2019." Padma Priya J, Director, Grant Thornton India LLP, Bengaluru "Infrastructure sector got a further boost through increased allocations. Thrust on large infrastructure schemes and projects continue with rail and road sector getting an all-time high allocation, but the announcement to rationalise key linkages including `coal for power` and `power for rail` seems to be an important move." "The industry did expect some drastic measures to revive the private sector participation and improving operational efficiencies in the sector, but this has not been addressed." Radhika Rao, Group Economist, DBS, Singapore "Overall measures have very strong social sector emphasis, which covers agricultural and rural sectors all the way to health and education sectors. Simultaneously, there is focus on infrastructure as well." "As early as Aug-Sept last year, as the fiscal numbers were coming in, we were expecting a slippage in this target. But it has panned out. The bond market had expected fiscal slippage, I think it has not been as wide as feared." "Divestment is expected to be much better than targeted for the first time in many years." Sujan Hajra, Chief Economist, Anand Rathi Securities, Mumbai "We were expecting (fiscal deficit of) 3.4 percent for the current year and 3.2 percent for the next year, and these announcements are slightly higher than expected. This is slightly negative for bond markets." "The long-term capital gain is a singular negative thing for the stock markets." "With the agrarian crisis and unemployment situation, these kinds of policies are expected with or without elections." Shilan Shah, India Economist, Capital Economics, Singapore "It was no surprise to us that they relaxed the deficit targets. It looks like the BJP is aiming to shore up support among rural voters, there have been plenty of measures announced to boost the rural economy. These are quite trademark things ahead of an election." "In cumulative terms, the deficit has already overshot the previous target, it had to be revised up, but it does need to demonstrate some kind of fiscal prudence. The deficit this year will be same as last year, I don`t think that comes as a surprise."

'One of the most populist budgets,' says economist Arun Singh

India will borrow an additional 500 billion rupees ($7.79 billion) this fiscal year, a higher-than-expected figure that could lead to it breaching its fiscal deficit target for the first time in four years and hit the bond and equities markets.

The announcement by the finance ministry on Wednesday comes weeks after Moody&#39;s Investors Service upgraded India&#39;s sovereign credit rating for the first time in nearly 14 years, in a boost for Prime Minister Narendra Modi&#39;s government. It had vowed to maintain fiscal discipline without compromising growth.

But analysts said the additional borrowing was a &quot;negative&quot; that could raise the fiscal deficit to 3.5 percent of gross domestic product, against Finance Minister Arun Jaitley&#39;s stated target of 3.2 percent.

India is having to raise the extra funds as the federal government has already spent over $200 billion in eight months to October, about 60 percent of the budgeted spending, while revenue collections were just 48 percent of the target.

The government&#39;s tax collection plunged after the launch of the national Goods and Services Tax (GST) in July that complicated tax filings for business and hit the economy.

Aditi Nayar, an economist at ICRA, the Indian arm of rating agency Moody&#39;s, said the additional borrowing could lead to &quot;modest fiscal slippage&quot; as the government was likely to miss its revenue receipts target.

&quot;Given the clouded outlook for revenues, sticking to the fiscal consolidation roadmap would entail compression of expenditure, which would dampen the expected economic growth recovery in March quarter,&quot; Nayar said.

Rajiv Kumar, vice chairman of the government&#39;s policy panel NITI Aayog, said the borrowing was required to &quot;nurture the green shoots of economic recovery&quot;.

&quot;The health of the economy is more important than meeting any fiscal deficit target,&quot; he told ET Now news channel.

A few analysts, however, said some additional borrowing was expected and was priced into bond yields, meaning there are unlikely to be big swings in them on Thursday. The announcement on borrowing came after markets closed on Wednesday.

Reuters reported earlier that the government was considering cutting capital expenditure by at least 300 billion rupees in the March quarter.

New Delhi has also sought higher dividends from state companies.

N.R. Bhanumurthy, an economist at New Delhi think-tank National Institute of Public Finance and Policy, said the government was entering &quot;uncharted territory&quot; after the fall in revenue collections.

&quot;In any case, a 3.2 percent target was not a realistic number after the launch of GST.&quot;

The government's tax collection plunged after the launch of the national Goods and Services Tax (GST) in July that complicated tax filings for business and hit the economy.

India will borrow an additional 500 billion rupees ($7.79 billion) this fiscal year, a higher-than-expected figure that could lead to it breaching its fiscal deficit target for the first time in four years and hit the bond and equities markets. The announcement by the finance ministry on Wednesday comes weeks after Moody's Investors Service upgraded India's sovereign credit rating for the first time in nearly 14 years, in a boost for Prime Minister Narendra Modi's government. It had vowed to maintain fiscal discipline without compromising growth. But analysts said the additional borrowing was a "negative" that could raise the fiscal deficit to 3.5 percent of gross domestic product, against Finance Minister Arun Jaitley's stated target of 3.2 percent. India is having to raise the extra funds as the federal government has already spent over $200 billion in eight months to October, about 60 percent of the budgeted spending, while revenue collections were just 48 percent of the target. The government's tax collection plunged after the launch of the national Goods and Services Tax (GST) in July that complicated tax filings for business and hit the economy. Aditi Nayar, an economist at ICRA, the Indian arm of rating agency Moody's, said the additional borrowing could lead to "modest fiscal slippage" as the government was likely to miss its revenue receipts target. "Given the clouded outlook for revenues, sticking to the fiscal consolidation roadmap would entail compression of expenditure, which would dampen the expected economic growth recovery in March quarter," Nayar said. Rajiv Kumar, vice chairman of the government's policy panel NITI Aayog, said the borrowing was required to "nurture the green shoots of economic recovery". "The health of the economy is more important than meeting any fiscal deficit target," he told ET Now news channel. A few analysts, however, said some additional borrowing was expected and was priced into bond yields, meaning there are unlikely to be big swings in them on Thursday. The announcement on borrowing came after markets closed on Wednesday. Reuters reported earlier that the government was considering cutting capital expenditure by at least 300 billion rupees in the March quarter. New Delhi has also sought higher dividends from state companies. N.R. Bhanumurthy, an economist at New Delhi think-tank National Institute of Public Finance and Policy, said the government was entering "uncharted territory" after the fall in revenue collections. "In any case, a 3.2 percent target was not a realistic number after the launch of GST."

India faces fiscal deficit target miss after extra borrowing

The chief of India&#39;s central bank on Wednesday warned the federal government that not wresting a ballooning fiscal deficit might cause long-term economic damage.

Reserve Bank of India governor Urjit Patel said not reducing the high borrowing levels was also hampering the country&#39;s sovereign ratings.

Patel, speaking at an investors&#39; summit in India&#39;s western Gujarat state, said both the federal government and state governments had to &quot;take cognisance&quot; of the matter to &quot;mitigate financial volatility&quot; in near future.

India&#39;s total fiscal deficit is targeted at 6.4 per cent of GDP in 2016-17, which is above the norm for most emerging markets and G20 countries. In comparison, China&#39;s government deficit was a little above two percentage points in 2016.

Patel&#39;s comments come weeks before the Narendra Modi administration is set to announce its annual budget.&nbsp;

The high debt burden has also scuttled India&#39;s chance of upgrading credit rating. Recently, Reuters had reported that the Indian government had pushed Moody&#39;s to get a better rating from its existing Baa3 rating -- the lowest investment grade.

But the international credit rating agency remained unmoved, with&nbsp;the company&#39;s senior vice president and sovereign analyst&nbsp;Marie Diron reasoning that high debt levels and the saddled banking sector&nbsp;were key reasons for the status quo.

(WION with inputs from Reuters)

&nbsp;

India's total fiscal deficit is targeted at 6.4 per cent of GDP in 2016-17, which is higher than most G20 countries

The chief of India's central bank on Wednesday warned the federal government that not wresting a ballooning fiscal deficit might cause long-term economic damage. Reserve Bank of India governor Urjit Patel said not reducing the high borrowing levels was also hampering the country's sovereign ratings. Patel, speaking at an investors' summit in India's western Gujarat state, said both the federal government and state governments had to "take cognisance" of the matter to "mitigate financial volatility" in near future. India's total fiscal deficit is targeted at 6.4 per cent of GDP in 2016-17, which is above the norm for most emerging markets and G20 countries. In comparison, China's government deficit was a little above two percentage points in 2016. Patel's comments come weeks before the Narendra Modi administration is set to announce its annual budget. The high debt burden has also scuttled India's chance of upgrading credit rating. Recently, Reuters had reported that the Indian government had pushed Moody's to get a better rating from its existing Baa3 rating -- the lowest investment grade. But the international credit rating agency remained unmoved, with the company's senior vice president and sovereign analyst Marie Diron reasoning that high debt levels and the saddled banking sector were key reasons for the status quo. (WION with inputs from Reuters)

Reduce borrowing levels to avoid economic volatility, warns RBI

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