India’s central bank, the Reserve Bank of India (RBI) has said that the government will further borrow Rs 40,000 crore, increasing the gross borrowings for the financial year.

The borrowing from the government may reduce the resources for the private sector, which has already reduced investments due to the global economic uncertainties.

Analysts say that government borrowings will boost the yield on Indian bonds. The benchmark 10-year government bond yield is expected to rise 5 basis points in opening trades on Tuesday following the announcement of the unscheduled auction.

They say that the government has not made it clear if the funding will be a part of the already announced borrowing target for the current year. Market expects the government to announce additional borrowing of about Rs 40,000 crore in the current financial year.

The fiscal deficit for April-November has touched R3.53 lakh crore or 85.6% of the budget estimate of R4.12 lakh crore or 4.6% of the GDP for the year, according to the latest data released.

The deficit is due to lesser than expected tax revenues, low disinvestment proceeds and inadequate control on spending by the government.