India to borrow record 17.2 trillion rupees in fiscal year 2027

MUMBAI (Reuters) – India's federal government will borrow a record 17.2 trillion rupees ($187.6 billion) in fiscal year 2026–27, with the bond supply higher than most market estimates, the annual budget showed on Sunday.

Finance Minister Nirmala Sitharaman announced a budget that makes a fresh bet on the local manufacturing sector in Asia's third-biggest economy, pledging to accelerate growth amid a volatile global environment.

The gross borrowing will be 17% higher than the current fiscal year's 14.61 trillion rupees.

The net borrowing will rise to 11.73 trillion rupees next fiscal from 11.33 trillion rupees for the current fiscal, according to the budget. India's fiscal year runs April through March.

Market participants were expecting gross borrowings in the range of 16 trillion rupees to 17.50 trillion rupees, with the median of a Reuters poll of 35 economists at 16.3 trillion rupees.

Government bond yields have risen over the past few months as large federal and state government borrowings have overwhelmed demand for government debt.

India federal government's gross market borrowings.

The bond markets are closed on Sunday. The benchmark 10-year bond yield could see a further uptick when trading resumes on Monday.

Traders fear the heavy supply could keep yields elevated, even after the Reserve Bank of India's unprecedented support, including through record bond purchases and foreign-exchange swaps.

"The overall gross and net borrowing numbers, along with the lack of any specific measures to address demand for bonds, will clearly weigh on market," said Rajeev Radhakrishnan, fixed income CIO at SBI Mutual Fund.

"The bond market in the near term will continue to depend on RBI's open market operations to anchor yields. This (the borrowing) remains a challenge and could keep yields elevated relative to underlying macroeconomic numbers."

A bar chart that show's India plans to lower its fiscal deficit in FY27.

The government, which has shifted to a debt-to-GDP ratio target for fiscal policy, aims to bring down this ratio to 55.6% in the next fiscal year, which leads to a fiscal deficit of 4.3% of gross domestic product.

A line chart showing India's fiscal deficit and debt to GDP ratio. India aims for a lower fiscal deficit and debt-to-GDP ratio in 2026-27.

The metric, which measures the gap between government spending and revenue, is closely watched for its impact on borrowing needs, debt levels and market confidence.