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Fiscal glide path pushed back to 2021
Context
The last full budget of the Narendra Modi-led Bhartiya Janata Party government before the general elections due in 2019 missed the fiscal deficit target of 3.2% for 2017-18
Bond yields rise as the government misses deficit target of 3.2%; analysts expect yields to remain elevated
Why?: This was attributed to revenues to be received under the Goods and Services Tax (GST) for 11 months, instead of 12. The revenue for March will be received in April.
Fiscal Deficit targets
The government said the fiscal deficit target for next financial year would be 3.3% and 3.1% for the year after and then 3% for 2020-21.
Bond prices slumped
Bond prices slumped as the government missed the fiscal deficit target with the yield on 10 year government bond shot up 17 bps to end the day at 7.6%. Yields are expected
Government borrowing
The government pegged its net market borrowing at Rs. 4.62 trn in FY19 (excluding buyback and switches), which is in line with what the market had estimated.
