The government is likely to borrow less in the new financial year that begins on April 1 than in 2012-13 because of its surplus cash balance, two government sources told Reuters on Monday.
Lower government borrowing could help bolster India's growth prospects by reducing borrowing costs for private investors and facilitating a pick-up in capital investments, which are projected to hit at least a five-year low this fiscal year.
New Delhi has built up a cash surplus of about Rs 800 billion (Rs 80,000 crore) as a result of Finance Minister P. Chidambaram's deep spending cuts to keep the fiscal deficit down at 5.3 percent of gross domestic product this fiscal year.
"Our borrowing requirement next year will come down, but the (fiscal) deficit number will remain unchanged," said one of the two senior officials with direct knowledge of the matter.
India has set a target of cutting its fiscal deficit to 4.8 percent of GDP in the next fiscal year.
The official, however, said the government is still to work out how much it needs to borrow in 2013-14. Chidambaram will reveal the borrowing plans in his budget speech on February 28.
The government is on track to borrow Rs 5.7 trillion (Rs 5.7 lakh crore)) by issuing bonds in the current fiscal year that ends in March. It has thus far raised Rs 5.48 trillion (Rs 5.48 lakh crore) and will borrow the remainder by February 22.
Faced with a tough task of trimming a swollen fiscal deficit that has put India's investment-grade credit rating in peril, Chidambaram has reduced budgeted spending by about Rs 1.1 trillion (Rs 1.1 lakh crore) in the current financial year, some 8 percent of budgeted outlay.
Although those cuts have tightened market liquidity, they have helped shore up government coffers.
"We are intentionally piling up cash to meet redemption requirements," said another official. "You cannot repay next year's redemptions with this year's borrowing."
Government bonds worth about Rs 950 billion (Rs 95,000 crore) are due for redemption in 2013-14.