MUMBAI: Economic Survey 2008-09 tabled in Parliament four days before Budget 2009-10 has cheered the government bond market as it seeks to reduce the impact of the huge borrowing programme outlined for the year ending March 2010.

Bond prices rose after Economic Survey indicated the government must target raising Rs 25,000 crore every year by way of stake sale in state-owned enterprises. This amount could be garnered through sale of 5-10% equity in government-owned companies, the Survey indicated. The Survey has also hinted at selling loss-making PSUs that have not been revived.

Buying in bonds had picked up after the hike in fuel prices led to the view that the subsidy burden on the government would reduce, which would reduce the pressure on the fisc. In an unexpected move, the government raised petrol price by Rs 4/litre and diesel price by Rs 2 per litre yesterday.

In the interim budget presented a few months ago, the government had pegged borrowing at Rs 3.62 lakh crore for the current financial year. In the last fiscal, the government borrowed Rs 3.10 lakh crore to meet its expenditure following the stimulus packages.

Over the last few weeks, bond prices have been falling and yields rising as Reserve Bank of India (RBI) raised the weekly borrowing figure to Rs 15,000 crore compared with Rs 12,000 crore outlined in the borrowing schedule.

The bond market is now awaiting the Budget that would be announced by Finance Minister on July 6, which would outline the borrowing amount for the rest of the financial year.