India’s Chief Economic Adviser has delivered a reassuring macroeconomic outlook, confirming that the government’s second-half borrowing plan for FY25 will remain unchanged and expressing confidence in meeting the fiscal deficit target. In a detailed interview with CNBC-TV18 on September 22, 2025, the adviser also noted that there is room for the benchmark 10-year bond yield to decline further and projected a benign inflation trend through the end of calendar year 2026.
The remarks come at a critical juncture for financial markets, as investors weigh global volatility against India’s relatively stable fiscal and monetary backdrop. With foreign inflows strengthening and commodity prices easing, the government’s tone signals continuity, prudence, and optimism.
Key Highlights From The Adviser’s Statement
- H2 borrowing for FY25 to remain unchanged at Rs 6.61 lakh crore
- Fiscal deficit target of 4.9 percent of GDP remains achievable
- 10-year bond yield, currently near 6.71 percent, may soften further
- Inflation expected to remain moderate through end of 2026
- Green bonds worth Rs 20,000 crore included in H2 borrowing mix
Borrowing Plan And Market Implications
The government will borrow Rs 6.61 lakh crore in the second half of FY25, accounting for 47.2 percent of the full-year gross market borrowing target of Rs 14.01 lakh crore. This borrowing will be conducted via weekly auctions of dated securities with maturities ranging from 3 to 50 years. The largest allocation is to 10-year bonds, which continue to attract strong demand from domestic and foreign investors.
The unchanged borrowing plan reflects the government’s confidence in its revenue projections and expenditure control. It also signals to the market that there will be no surprise supply shocks, helping anchor bond yields and support investor sentiment.
Bond Yield Outlook And Demand Dynamics
The 10-year benchmark bond yield has declined by over 40 basis points in 2025, making it one of the best-performing sovereign securities in Asia. The yield currently hovers around 6.71 percent, a level last seen in early 2022. According to the Chief Economic Adviser, there is scope for further softening, driven by:
- Inclusion of Indian bonds in global indices, boosting foreign inflows
- Expectations of monetary easing by the Reserve Bank of India
- Stable inflation and improving fiscal metrics
- Strong demand from pension funds, insurance companies, and foreign portfolio investors
The issuance of 50-year securities for the first time in H2 is also expected to deepen the yield curve and provide long-duration instruments for institutional investors.
Fiscal Deficit Target And Revenue Trends
The government remains confident of meeting its fiscal deficit target of Rs 16.13 lakh crore, or 4.9 percent of GDP, for FY25. This is supported by:
- Healthy GST collections and direct tax receipts
- Rationalized subsidy expenditure and capital spending discipline
- Strategic use of small savings and cash balances to manage short-term funding needs
The adviser emphasized that the fiscal roadmap remains intact and that the government does not anticipate any major deviation from budgeted figures. Sovereign gold bonds and other instruments will be used selectively, depending on market conditions.
Inflation Outlook And Policy Implications
In a notable forward-looking statement, the Chief Economic Adviser projected a benign inflation trend through the end of calendar year 2026. This outlook is based on:
- Stable food and fuel prices
- Improved supply chain dynamics
- Moderation in global commodity prices
- Continued monetary vigilance by the Reserve Bank of India
The inflation forecast supports expectations of a dovish monetary stance and reinforces the case for lower bond yields in the coming quarters.
Looking Ahead
With the H2 borrowing plan locked in, fiscal targets reaffirmed, and inflation expected to remain moderate, India’s macroeconomic outlook appears well-anchored. The government’s messaging is expected to reinforce investor confidence and support continued participation in sovereign securities.
As global markets remain volatile, India’s measured fiscal stance and improving macro indicators could position it as a relative safe haven for fixed income investors.
Sources: CNBC-TV18, Financial Express, Moneycontrol, EquityPandit.
