The Indian government's total liabilities have increased to ₹150.95 lakh crore in the December quarter of 2022-23, according to the latest public debt management report by the Finance Ministry. The report highlights that public debt accounted for 89% of the total outstanding liabilities in the quarter, with approximately 28.29% of the outstanding dated securities having a residual maturity of less than five years.

 

During the quarter, the Centre raised an amount worth ₹3,51,000 crore through dated securities, as against the notified amount of ₹3,18,000 crore in the borrowing calendar. The report notes that the weighted average yield of primary issuances hardened to 7.38% in Q3 FY23, up from 7.33% in Q2 of FY23. Additionally, the weighted average maturity of new issuances of dated securities elongated to 16.56 years in Q3 of FY23, from 15.62 years in Q2 of FY23.

 

The report also sheds light on the Reserve Bank of India's (RBI) actions during the quarter, noting that the central bank did not conduct Open Market operations for government securities. The net daily average liquidity absorption by RBI under Liquidity Adjustment Facility (LAF), including Marginal Standing Facility and Special Liquidity Facility, was at ₹39,604 crore during the quarter.

 

The interest rate on 10-year benchmark security softened from 7.40% at the close of the quarter on September 30, 2022, to 7.33% at the close on December 30, 2022, marking a softening of 7 bps during the quarter. However, the Monetary Policy Committee (MPC) decided to hike the policy repo rate by 35 bps, from 5.90% to 6.25%, mainly to contain inflation.

 

In conclusion, the Finance Ministry's report highlights the increase in the government's total liabilities, primarily driven by public debt. It also reveals trends in primary issuances, weighted average yield and maturity of securities, and the RBI's liquidity absorption. The report is an essential source of information for policymakers, analysts, and investors seeking insights into India's debt management policies and their impact on the economy. Reference source: TH

 

UPSC Main Exam Question

 

What are the key findings of the latest public debt management report released by the Finance Ministry for Q3 FY23, and how do they reflect the current state of the Indian economy?

 

Answer: The Finance Ministry recently released the public debt management report for Q3 FY23, which highlights several key findings related to the government's total liabilities and public debt. The report reveals that the government's total liabilities have risen to ₹150.95 lakh crore in the December quarter of 2022-23, marking a 2.6% increase from the ₹147.19 lakh crore recorded in the previous quarter. Furthermore, public debt accounted for 89% of the total outstanding liabilities in the December quarter, with nearly 28.29% of the outstanding dated securities having a residual maturity of less than five years.

 

The report also highlights that the Centre raised an amount worth ₹3,51,000 crore through dated securities during the quarter, while the weighted average yield of primary issuances increased to 7.38% in Q3 FY23. Additionally, the weighted average maturity of new issuances of dated securities elongated to 16.56 years in Q3 of FY23, and the interest rate on 10-year benchmark security softened from 7.40% to 7.33% during the quarter.

 

Furthermore, the report notes that the Reserve Bank of India did not conduct Open Market operations for government securities during the quarter, and the net daily average liquidity absorption by RBI under Liquidity Adjustment Facility (LAF) including Marginal Standing Facility and Special Liquidity Facility was at ₹39,604 crore during the quarter. The Monetary Policy Committee (MPC) also decided to hike the policy repo rate by 35 bps, from 5.90% to 6.25%, largely to contain inflation.

 

Overall, the report's findings suggest that the Indian economy is currently grappling with high levels of public debt and rising interest rates, as well as concerns around inflation. While the Centre has been able to raise significant amounts of capital through dated securities, the increasing maturity of these securities and the relatively high yields they offer could pose challenges in the long run. At the same time, the RBI's efforts to absorb liquidity through LAF and other measures reflect its concern around inflation, which remains a key macroeconomic challenge for the country.