Yield is a function of demand and supply fundamentals in the market and several factors, including global ones, feed into that.
Some firming up of bond yields, sure deal with that in an orderly manner, Seth told in an interview, stressed that borrowing and fiscal deficit estimates have to be weighed in the context of the growing size of nominal gross domestic product.
The Centre’s gross market borrowing is estimated at Rs 10.47 lakh crore for this fiscal. With the expectation of tightening of rates by key central banks, global commodity prices may dip.
A net importer is India being, which stands to gain from this type of phenomenon, as inflationary pressure will likely abate, Seth said. Wholesale involved price inflation averaged as much as 12.5% between April and December.
The government and the central bank can deal with the movement of bond yield “in an orderly” economic affairs secretary Ajay Seth explained FE on Wednesday.
Seth explained the Budget’s projection of a nominal GDP growth rate of 11.1%. And is in sync with the concept of prudent Budget-making — that there shouldn’t be over-estimation.
The yield on the new benchmark 10-year government securities inched up again on Tuesday, marginally 6.85%, having risen by 15 basis points in the previous day.
The benchmark has risen 40 basis points (bps) so far in 2022 on top of the 56 bps in 2021. However, he added the finance ministry shares the optimism of the Economic Survey’s prediction that real growth of 8-8.5%.
Because the implicit GDP deflator is expected to be much lower next fiscal, wholesale price inflation, in particular, will moderate, partly driven by the high base effect, he added.
Moreover, India included a net importer and stands to gain from this type of phenomenon, as inflationary pressure will likely abate, Seth said.
Wholesale price inflation averaged as much as 12.5% between April and December.
The government has estimated a substantial drop in its off-take from the National Small Savings Fund into part-finance fiscal deficit, as it expects lower inflows.
Partly it’s because people may opt for more attractive instruments to invest in, with the economic recovery taking roots, Seth explained.
Follow and connect with us on Facebook, LinkedIn & Twitter
