India finance minister says high bond yields making borrowing unaffordable amid low interest rates

NEW DELHI: India’s Finance Minister Nirmala Sitharaman on Friday said that rising bond yields had made borrowings expensive for the government at a time when interest rates were low.

India’s 10-year benchmark bond rose by 19 basis points in August, its biggest monthly spike in three years. Its yield settled at 6.4651% on Friday, compared with the previous close of 6.4934%.

“It is not affordable at the time when interest rates are otherwise low, bond yields becoming unsustainably high has a big bearing on the government,” Sitharaman said in an interview with news channel CNN-News18.

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Earlier this week, the federal government slashed taxes on hundreds of consumer items, which it estimated would lead to a revenue loss of 480 billion Indian rupees ($5.49 billion), raising investors’ concerns about New Delhi’s ability to meet its fiscal deficit target.

Sitharaman said the government will meet its fiscal deficit target of 4.4% of GDP for the current financial year ending March 31 without cutting its 11.21 trillion-rupee infrastructure spending plan.

“Capital expenditure of the government will not come down. It will be completed as stated in the Budget, and so will the fiscal deficit. This is the last point of my gliding path, I will adhere to it,” Sitharaman said.

Sitharaman also said the stake sale in IDBI Bank is expected to be concluded in the ongoing financial year. Last month, the country’s divestment secretary said the government will invite bids for the stake sale between October and December.