The Reserve Bank of India (RBI) announced on Monday that the government is cancelling the financial year’s last bond auction given its cash position. For once we can say we told you so. On March 1, this column had argued that the fiscal data for April-to-January, released on Feb 28, had shown that the government will most likely overshoot its tax revenue targets by about Rs 1.5-1.8 lakh crore, while it could fall short of spending the revised budgeted amount of Rs 34.5 lakh crore.

In fact, we had argued the government could have cancelled the entire extra Rs 80,000 crore it said it would borrow from the market this year. But as they say in Hindi “der aaye durust aaye”.

The direct tax numbers that the government revealed as of March 16, after advance tax collections further confirmed our’ and the markets’ calculations. The direct tax collections were a good Rs 20,000 crore higher than the revised estimates for the full FY21.

One still doesn’t have the full picture for indirect tax collections for the year which has also handsomely overshot. The non-tax revenues may also be higher than the revised numbers.

The entire exercise of revenue underestimation may be a plan of the government to ensure a bond rally at the end of March so that banks can report handsome mark-to-market gains. With crude as well cooling off, the benchmark 10- year bond yield may well end the year closer to 6 percent than to 6.25 percent.

Prepare for a bank and bond rally tomorrow.

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(Edited by : Abhishek Jha)