MUMBAI,2011,December 31: India increased its record borrowing programme for the year by 8.5 per cent to narrow a budget shortfall as a slowing economy damps tax collections.Prime Minister Manmohan Singh’s government will sell an additional Rs400 billion ($7.5 billion) of bonds in the year ending March 31 raising an unprecedented total of Rs5.1 trillion, the central bank said in a statement on Friday. Indian 10-year benchmark bond yields have jumped the most in Asia after Vietnam, as the government sold more debt to meet its target of keeping the budget gap to 4.6 per cent of gross domestic product. The rate on the 8.79 per cent note due November 2021 climbed two basis points today and 20 this week to 8.57 per cent, according to the central bank’s trading system. “The market is already burdened by supplies,” Debendra Kumar Dash, a fixed-income trader at Development Credit Bank in Mumbai. “However this increase was expected, and so while we could see yields rising in early trades on Monday, they will settle down soon.” The 10-year bond yield could rise as high as 8.70 per cent, according to Development Credit Bank and IDBI Bank following the increase in the bond-sale plan. The Reserve Bank of India has said the government must rein in borrowings to help check price gains and boost economic growth. The $1.7 trillion economy may miss the central bank’s growth estimate of 7.6 per cent for the 12 months ending March 31, Governor Duvvuri Subbarao said on December 22. The government increased its borrowing plan by Rs528.7 billion in September. The nation’s indirect tax revenue rose 16.9 per cent in the eight months through November from a year earlier, S.K. Goel, chairman of the Central Board of Excise and Customs, said on December 9. That compares with a target for a 17.3 per cent increase this fiscal year.
