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The yield on India’s 10-year government bond rose to 6.78% on Monday from 6.70% on Friday, its biggest intraday rise since late August. What appears to have put investors off is the 18% increase announced on Sunday in the government’s gross market borrowing plan for 2026-27, although the rise in net borrowing is much less dramatic.

In the budget’s run-up, expectations were rife of a fiscal deficit reduced by more than what turned out to be the case, implying more-than-expected bond issuance.

As market borrowings by state governments have been on the rise, fears may have arisen of bond oversupply. Weaker bond prices imply higher yields, which tend to put upward pressure on the rates of interest that private borrowers must pay.

Caught in the middle is the Reserve Bank of India, which must manage monetary policy as well as the Centre’s debt. Keeping rates low for everyone gets harder when overall demand weakens for government bonds.

The appetite of foreign investors seems to have flagged lately. Are they going by India’s fiscal math? Or is there more to it? This is part of a question raised by this year’s Economic Survey. What we don’t have yet is a clear answer.

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