The government cut its planned market borrowing on Thursday, sending a strong signal that the fiscal situation is comfortable despite higher expenditure on food and fertiliser subsidies. The lower-than- budgeted borrowing plan is expected to provide some comfort to the jittery bond market ahead of the Reserve Bank of India RBI monetary policy announcement on Friday. The Centre will borrow 5.92 lakh crore in the second half of FY 23, which is 10,000 crore less than intended, according to an official statement. The first green bonds, worth 16,000 crore, will be included in the second half of the borrowing. The government has pegged gross market borrowing through dated securities for FY 23 in the budget at 14.95 lakh crore, according to Aditi Nayar Chief Economist, ICRA The government has pegged revenues for a large part of the higher-than- budgeted expenditure, which appears to have restricted the size of the H 2 FY 23 borrowing programme. This was lowered after the switch operations on January 28, 2022, to 14.31 lakh crore, and now to 14.21 lakh crore. There will be a reduction in lending and a rise in credit demand in the last few months due to the economic recovery, which will calm concerns about the possibility of crowding out of private sector borrowing. The 10-year government bond yield was almost unchanged at 7.3405% on Thursday against 7.3340% on Wednesday. Yields may take a cue from the tone and outlook portrayed by the monetary policy committee's statement on Friday, especially when it comes to how much more monetary tightening lies ahead, Nayar said. The Bank of Baroda chief economist Madan Sabnavis said yields would be driven by the liquidity situation in the short term. He said that they will be driven by the repo rate and progress on the inclusion of India bonds in global indices in the long term. The government has a fiscal deficit of 6.4% of GDP in FY 23. A government official said that additional expenditure would be financed by higher tax revenues and savings by some ministries, if the Centre could raise 10,000 crore from other sources, such as small savings. The food and fertiliser subsidy bill, which was pegged at Rs 3.12 lakh crore for FY 23, is facing a significant increase in the government's food and fertiliser subsidy bill. The fertilizer subsidy bill for FY 23 is expected to be around Rs 2.3 lakh, due to higher international prices. The food subsidy bill is likely to jump to Rs 3.84 lakh crore as opposed to Rs 2.07 budgeted for this fiscal year, after another three-month extension of the free food grain scheme was announced on Wednesday. The higher tax collections are seen to absorb most of the additional spending. In the first half, direct and indirect tax collections have grown by around 30% and are expected to surpass budgeted estimates. The finance ministry said that the RBI will announce details of the sovereign green bonds later. The gross market borrowing will be completed through 20 weekly auctions, spread over securities with tenors of two, five, seven, 10, 14, 30 and 40 years. The government will continue to use the greenshoe option to retain a subscription of up to 2,000 crore against each of the securities indicated in the auction notification. The Centre will issue treasury bills worth Rs 22,000 crore every week in the third quarter of FY23, which will result in a borrowing of Rs 2.86 lakh crore. The RBI fixed the ways and mean advances WMA limit for the second half at Rs 50,000 crore, in order to take care of temporary mismatches in government accounts.