Bond market whispers.

According to the Ministry of Statistics and Programme Implementation (MoSPI), India's Real GDP grew at 8.2% in the second quarter of 2025-26 and by 8.0% in the first half of the current financial year. pib.gov.in. According to the First Advanced Estimates by MoSPI, Real GDP grew 7.4%, and Nominal GDP at 8.0% in Financial Year 2024-25. mospi.gov.in. And despite this scorching economic growth, India's net foreign direct investment (NFDI) "has actually been negative in the in the last 4 mths (-$2.40 bn in September 2025; -$0.167 bn in October; -$0.446 bn in November ; -$1.61 bn in December)." Because Indian companies are investing abroad, though modestly, and foreign investors are repatriating dollars by paring down their investments in Indian companies whose equities have been pushed sky high by domestic investors. "This is what dynamic capitalism should look like," wrote Swaminathan Aiyar. Is India really a capitalist country? Last week, the Supreme Court observed "That the seemingly endless freebies... at both the Union and state levels with no heed paid to who can or cannot pay amounts to 'appeasement'." "The 2024 poll results in Maharashtra and Jharkhand are surmised to have been influenced by freebie schemes, as also last year's Bihar polls, whose freebie bill was was estimated to exceed Rs 300 billion." Mint. Axis Bank's research estimates that "nearly one-fifth of India's women are receiving cash payments. Total payments this year will be 0.5% of GDP, and in some states exceed 5% of the government's expenditure," wrote Ajit Ranade. Naturally, governments will need to borrow more from the markets? Last week, yields on the benchmark 10-year bonds spiked to 6.7214% on fears of US-Iran conflict pushing up oil prices. ET. Yesterday, yields fell to 6.6726% on strong buying investors in the 'others category', which includes the Reserve Bank of India (RBI), who net bought bonds worth Rs 74.84 billion ($823.12 million). ET. Since February 2025, the RBI has cut its policy rates by 125 basis points (bps) and yet yields on GOI bonds rose 7 bps over the one year period. Because the government has increased its borrowing program to Rs 17.2 trillion and net borrowing to Rs 11.7 trillion in 2026-27. "In FY25, the RBI conducted net OMO (open market operations) purchases  totaling Rs 6.8 trillion and buy-sell swaps of $25 billion." Mint. India's merchandise trade deficit rose to $34.68 billion in January from $25.04 billion in December. ET. And yet, "India's foreign exchange reserves rose by $8.66 billion from a week earlier to hit an all-time high of $725.727 billion in the week ending 7 February." ET. So, the RBI is directly financing government borrowing as well as injecting liquidity by borrowing dollars. It may seem like a game but playing with currencies is not a good idea. According to the Bank of International Settlements foreign exchange trading and over the counter (OTC) derivatives trading reached $96 trillion per day in April 2-25, with the US dollar figuring in 89% of all forex trades. This is more than 10 times the entire RBI reserves - in just one day. A sudden spike in inflation or a fall in the rupee could seriously upset RBI's clever tricks. The bond market is whispering. Listen carefully.