Tax & Spend
Rising India Rates to Upset Modi’s Budget Math on Small Savings
The government funds its fiscal deficit through a mix of borrowings from the bond market, proceeds from small savings and draw down from cash balance.
Photographer: Dhiraj Singh/BloombergThis article is for subscribers only.
India last week proposed a lower-than-expected market borrowing program, as part of a plan that sought to bridge its budget deficit by boosting reliance on the nation’s small savings pool.
The decision on Feb. 1 triggered the biggest drop in the benchmark 10-year bond yields in over two months. Bonds have since pared their gains, with the budget math increasingly looking daunting as commercial interest rates soar tracking a tight monetary policy.