India’s Second Half Borrowing Plan Balances Market Needs, But Yield Relief Hinges on RBI

India’s October–March borrowing calendar tried to struck a balance between fiscal prudence and market sensitivities. The government will raise ₹6.77 trillion in the second half of the current financial year, taking the full-year target to ₹14.72 trillion--slightly below the earlier projection of ₹14.82 trillion.

With ₹7.95 trillion already mobilised in April–September, the trimmed figure signals responsiveness to investor concerns.

The bigger takeaway lies in the tenor mix. The government has reduced ultra-long gilts supply —30–50 years — to 29.5% in the second half from 35% in the first, a sharper-than-expected cut. The decline is led by 40-year securities, which is down 3%, with 30- and 50-year segments trimmed by 1.3% each. At the same time, issuance in five-year, 10-year, and three-year maturities has been increased, pushing the 10-year share to 28.4% from 26.3%. This adjustment shifts the burden to the liquid belly of the curve — 10–15 years, now set to absorb 42.5% of gross supply.

Market reaction may be mixed. Traders expect selling pressure in the five- to 10-year zone, especially as the 10-year auction size has been raised to ₹320 billion from ₹300 billion, against calls for moderation. Conversely, the reduced ultra-long supply should draw demand, setting the stage for a bull-flattening of the G-sec curve—where shorter yields rise relatively faster than longer ones.

Officials emphasised the signaling value of the plan. Department of Economic Affairs Secretary Anuradha Thakur said the borrowing calendar demonstrates the government’s intent to “listen to markets,” while reaffirming confidence in achieving the 4.4% fiscal deficit target. Strong GST collections and buoyant indirect tax inflows provide fiscal comfort.

Finance Minister Nirmala Sitharaman also recently cautioned against “unsustainably high” yields, underscoring the need to balance borrowing costs with fiscal requirements.

Structurally, the reduced long-tenor supply aligns with easing demand from domestic long-term investors amid regulatory changes. Banking liquidity is expected to remain adequate in October–December, supported by the CRR cut, though festive cash leakage could erode some surplus.

Still, the scope for a deeper bond rally remains limited. Unless the RBI provides dovish guidance, steps up net purchases, or curtails state loan supply, yields may resist a sustained decline. In essence, while the second half borrowing plan trims supply overhang and offers a more market-friendly tenor profile, liquidity dynamics and central bank signals will remain the key triggers for yield movement.