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Indian government’s debt swells by 2.7% in September quarter

29 Nov 2011 Evaluate

Indian government’s debt increased to Rs 32.13 lakh crore at the end of September quarter from Rs 31.28 lakh crore in the previous quarter, representing an increase of 2.7% compared with an increase of 5.2% in the Q1 of FY12. According to the quarterly Public Debt Management report released by the finance ministry, increased market borrowings led to the rise in public debt. The report underscored that due to the tight monetary policy followed the RBI, the interest rate (yield) on bonds increased, thus pushing up the borrowing cost.

The July-September quarter report on Public Debt Management showed internal debt constituted 90.3% of public debt, more or less unchanged from the previous quarter. However, government's internal debt went up during the second quarter of 2011-12, which is evident from the fact that the outstanding internal debt of the government stood at Rs 29.01 lakh crore constituting 32.3% of GDP compared with 31.4% in the previous quarter.

The report also indicated that marketable securities consisting of rupee denominated dated securities and treasury bills/cash management bills accounted for 79.7% of total public debt, compared with 79.1% at end-June 2011. During the September quarter, the 10-year yield on government securities went up sharply, on the back of the repo rate hike of 50 bps by Reserve Bank on July 26, 2011 to reach a high of 8.47% on July 28. Thereafter, yields gradually drifted down and remained range bound till September 28, 2011. Higher borrowing announcement of Rs 52,872 crore in the second half calendar for bonds pushed up yield and it closed the quarter at 8.44%, according to the report.

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