Bond and forex market signals: Read them right

India must interpret what hardened bond yields and the rupee's slide are telling us with due care. Heeding these market signals will help us ride out today's tariff-induced storm

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Rising bond yields and a depreciating currency. The two noteworthy features that characterized the macro scenario of India's economy last week are two sides of the same coin. Both reflect underlying market scepticism about the soundness of our macro fundamentals. Lower demand for bonds results in lower prices and higher yields. At the same time, to the extent this is the result of reduced interest from overseas buyers, it results in reduced dollar inflows, leading to a depreciation of the rupee vis-à-vis the dollar. It is easy to dismiss this as just another example of the contrariness of free market forces. After all, we have just recorded the fastest GDP growth of the past five quarters, at 7.8% for the April-June 2025 period. Retail inflation is at an eight-year low of 1.55% (in July) and the current account deficit is within manageable limits. Granted, the first quarter's robust growth was for a period before the US hiked its tariffs to 50% on 27 August. But the global rating agency Standard & Poor's has just