Explainer: Why states borrowing more is affecting India's bond market
Indian states are borrowing way more than usual this year, and it's shaking up India's bond scene.
Net state borrowing jumped 33% to ₹2.2 lakh crore by mid-August, and experts think it could hit ₹9 lakh crore by the end of March.
All this extra borrowing is pushing up government bond yields, which basically means it's getting pricier for everyone—businesses and the central government included—to raise money.
Investors are shifting to state bonds
Since state bonds now offer higher returns (7.54%) compared to regular government bonds (7.32%), investors are increasingly favoring state bonds.
This shift is making it tougher for Indian companies to get loans—they're facing steeper costs.
So while investors chase better deals, businesses are left paying more to borrow cash in an already expensive environment.