The government had mopped up Rs 2,700 crore (Rs 27 billion) from the sale of a new 7 per cent, six-year tax-free bond till the first week of January, a finance ministry official said on Wednesday.
The sale of the tax-free bonds to retail investors began from October 1 and was seen as part of a series of measures by the government to win back middle-class voters who were alienated by tough tax measures in last February's national Budget.
"We have collected around Rs 2,700 crore from the sale of seven per cent bonds," the official, who did not wish to identified, told reporters.
He said the government expected to collect between Rs 10,000 crore and Rs 12,000 crore (Rs 100 billion and Rs 120 billion) from the sale of tax-free bonds.
The government also offers an eight per cent tax-spared bond with a maturity of five years and an investment ceiling of Rs 200,000 per retail investor.
He said the government had collected Rs 16,000 crore (Rs 160 billion) from sale of bonds in 2001-02 (April-March) when there was no investment cap but this year's collections would be lower because of the ceiling on the 8 per cent bond scheme.
Analysts say collections from the tax-free bonds would help the cash-strapped central government rein in its burgeoning fiscal deficit.
India aims to control its runaway deficit at 5.3 per cent of gross domestic product in the current financial year.
International rating agencies cite the high fiscal deficit as a major hurdle in upgrading India's current junk status and an obstacle in achieving higher growth rate needed to drastically cut poverty levels in Asia's third-largest economy.