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Rising India rates to upset PM Modi's Budget math on small savings

Bonds have since pared their gains, with the budget math increasingly looking daunting as commercial interest rates soar tracking a tight monetary policy

Photo: Bloomberg
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Photo: Bloomberg

Ronojoy Mazumdar and Adrija Chatterjee | Bloomberg
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.

The government pledged to shrink its budget gap to 5.9% of gross domestic product in the year starting April 1 from 6.4% this year. While Prime Minister Narendra