Growth in rupees, GDP in dollars.

"The Federal Reserve raised interest rates...and flagged more hikes to come in the coming months," as "an energy shock following the start of the US-Israeli war with Iran, and capital spending from the artificial intelligence boom has kept price pressures intense enough that the Fed felt it needed to raise its benchmark overnight interest rate by a quarter of a percentage point to the 3.75%-4.00% range." Reuters. This had an immediate effect on India. "Sovereign bond yields surged at the open on 17 September, while the rupee tumbled past the 96 dollar mark," and "The benchmark 10-year bond yield climbed to 7.0714% in early trade, up from 7.0524% in the previous session, as bond prices fell." MC. Why does a rise of just 0.019% in government bond yields create such panic? Because, in the 2026-27 Budget, "The government has pegged India's net market borrowing at Rs 11.7 trillion for the next fiscal year, slightly below the level in 2025-26, Finance Minister Nirmala Sitharaman said." ET. If you add 0.19% of Rs 11.7 trillion to overall fiscal borrowing and the national debt it does seem like a reason to panic about. "The Indian rupee breached the 96 mark against the dollar for the first time in nearly eight weeks," but, "the currency recovered from its lows to close at 95.93 per dollar, nearly flat from its previous close. Traders said that state-run banks likely sold dollars on the Reserve Bank of India's (RBI) behalf, which helped cushion the rupee's fall." FE. "The rupee may need to depreciate further to adjust to the sustained terms of trade shocks even as the trade-weighted real effective exchange rate (REER) fell to 91.75, a level last seen during the 2013 taper tantrum, Axis Bank said in a research report. The rupee has weakened nearly 6% this year." "The RBI is estimated to have sold $250 billion since mid-2023 to defend the local currency, nearly double of the inflows seen through the dedicated dollar-inflows program run between June and August." ET. Who gains when the RBI supports the rupee by selling dollars borrowed at over 6% interest rate (IDBI Bank)? "Foreign portfolio investors (FPI) pulled out nearly Rs 51.09 billion from Indian government securities under the Fully Accessible Route (FAR) in three days through September 15, amid rising crude prices, elevated US bond yields and renewed pressure on the rupee." TT. When they convert their proceeds they get more dollars because the RBI is pushing the rupee up. So, we the taxpayers are paying usurious interest to non-resident Indians (NRI) to borrow dollars and then transferring more of those precious dollars to FPIs because of an artificially stronger rupee by the RBI. The rupee is weak because, "The gap between Indian and US 10-year government bond yields has narrowed to nearly half its long-term average, raising the prospect that a shrinking yield premium could make the Indian debt less attractive to foreign investors and add pressure on the rupee." MC. The reason for the narrow yield spread between the US and India is because the RBI cut it policy rate by 25 basis points (bps) in December 2025 for a cumulative reduction of 125 bps for the whole year, despite noting real GDP growth of 8.2% in Q2:2025-26 (July-September 2025) and projecting real GDP growth of 7.3% in fiscal 2025-26. RBI projected consumer price (CPI) inflation at 3.9% at Q1 and 4% at Q2 of 2026-27. rbi.org.in. In reality, "India's retail inflation has accelerated to 4.82% in August from 4.45% in July," while, "wholesale inflation edged up to 9.92% in August from 9.78% in July." ET. The Fed is focused on inflation, the RBI is like a deer in headlights (wiktionary). Growth is measured in rupees, while the GDP is expressed in dollars (IMF). Rupee sinks, GDP sinks. Growth stunted.