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Red flags emerge for India's bond market as farmer bailouts rise

Uttar Pradesh set off domino effect by saying in April that it'll waive off loans worth Rs 36,360 cr

Subhadip Sircar | Bloomberg 

Investors in India’s bond market are already raising red flags on the potential impact from populist farmer bailouts being engineered by different state governments. Yields on the so-called state development loans (SDLs) climbed at the most recent auction, widening their spread over sovereign rates. The increase comes amid concern that waiving billions of dollars in farm loans will worsen already strained states’ finances. Debt sales by regional administrations are set to rise this quarter, and could pose a challenge for the federal government’s borrowing ...

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First Published: Sat, July 08 2017. 01:59 IST