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The bond market also drives India’s economy which is otherwise slowing, inflation is sputtering and the central bank is cutting interest rates. But the cost of long-term money is refusing to budge. The reason, in a single word: upcoming elections. Polls are scheduled in states. Prime Minister Narendra Modi probably would have liked to make NDA's reelection endorsement with less distress in the farm economy and a better jobs track record. If he hadn’t scored an own goal by banning 86 per cent of the country’s cash overnight, he might even have succeeded. Team Modi will end the fiscal year on March 31 with a huge deficit of roughly $190 billion, a pre-poll bump that doesn’t appear to have helped in pump-priming the economy.
The Gross Domestic Product (GDP) in India grew 0.70 per cent in the first quarter of 2020 over the previous quarter. It comes as little surprise that the country recorded its slowest GDP growth rate recently. More weakness is expected in the coming three months ending December 2020. That can only mean more disinflation and deeper interest-rate cuts. Why, then, is the 10-year Indian government bond yield doing very well, more than double the expected inflation rate for the year?
For both NBFC and corporate categories of bonds, the ranges grew by nearly 30-40 basis points between February 2020 and April 2020. moneyinvestors.in/bond-market/
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