Unwanted legacy.

On 5 May, "The Centre's decision to repurchase short-term government bonds, maturing within 6-9 months, is expected to lower yields and ease liquidity conditions, said market participants." "The decision came amid observations  that while government spending surged between February and April, there is an anticipation of a slowdown leading up to the June election results." BS. On 17 May, "The RBI repurchased only Rs 2,069 crore (Rs 20.69 billion) of government bonds from a notified amount of Rs 60,000 crore (Rs 600 billion) as banks were unwilling to sell at a loss. The central bank's second attempt to infuse liquidity saw a limited success as the securities were purchased by banks at higher prices." BT. "The Government's attempt to infuse liquidity through a bond buyback...failed again - the third time in a row this month - as the Reserve Bank of India (RBI) rejected most of the bids." "In the three buybacks conducted this month, the RBI has managed to repurchase bonds worth only Rs 178.49 billion, significantly falling short of the Rs 1.6 trillion target." Banks are demanding a higher price for the bonds which was rejected by the RBI. Because, "If it accepted bids at very high prices, short term bond yields would have fallen as if the RBI had cut interest rates. That would represent easier financial conditions. Given that inflation is still above 4%, the RBI would not want markets to start pricing in rate cuts when the central bank is working hard to keep inflation expectations anchored." ET. Banks may run short of liquidity because, "The robust post-pandemic economic recovery has seen a surge  in credit growth, especially in the retail segment." "The CD (credit-to-deposit ratio) is at a decadal high of 80%, CareEdge Ratings state in a March 2024 report." "According to RBI data, bank credit growth exceeded the increase in deposits by Rs 2 trillion in 2023-24. A key contributor to this trend has been the rise in equities as an asset class," wrote Abhishek Mukherjee. "Net household savings have fallen to a low of Rs 14.2 trillion in 2022-23 from a peak of Rs 23.3 trillion in 2020-21. That's a drop of Rs 9 trillion, or almost 40% in a brief period." It's not just a slowdown in the growth of deposits but a fall in absolute numbers. "According to official data, household MF (mutual funds) investments almost trebled to Rs 1.79 trillion from Rs 640.84 billion. in 2020-21; in debentures, they nearly doubled to Rs 2.06 trillion." Mint. "The Indian stock market has achieved a remarkable feat of adding $1 trillion in wealth within a span of 6 months. Yesterday, it entered the prestigious $5 trillion club for the first time, despite facing FII pullout ahead of the Lok Sabha election results on June 4." TOI. Not just equities. "The notional volume of equity derivative trading in India reached $6 trillion in early February, a six-fold surge since the start of 2022, before easing recently." ET. This is higher than India's GDP estimated at $4.112 trillion in Q3 of FY2024  (Forbes). What do all these data mean? Is there a danger of millions of people suddenly losing everything? That would leave banks losing trillions due to default. Mr Modi would perhaps not want such a legacy.