India Plans Record Borrowing to Spend Big To Spur Growth

India doubled down on its spending commitment, relying on an already swamped debt market to borrow and spend big to spur growth

India doubled down on its spending commitment, relying on an already swamped debt market to borrow and spend big to spur growth. Bonds tumbled and stocks rose.

Prime Minister Narendra Modi's administration will target a budget deficit of 6.4 per cent of gross domestic product for the year starting April 1 - wider than the median 6.1 per cent seen in a Bloomberg survey - as it prioritizes growth over fiscal consolidation.  “This pro-growth budget poses upside risk to our near-term GDP growth projections. But it also risks crowding out private investment by spurring bond yields higher.”

That plan will require borrowing a record 14.95 trillion rupees ($200 billion) to bridge the shortfall, much higher than the 13 trillion rupee consensus, as revenues from divestments are slow to materialize. -- Abhishek Gupta, Economist

“While the fiscal expansion is expected to be pro-growth, the heavy supply is expected to worry the bond markets,” said Upasna Bhardwaj, an economist with Kotak Mahindra Bank Ltd.  For the full report, click here