Twisting the curve

RBI's effort to address yield curve rise may not work as hoped

Investors have noted the steepening of the yield curve for Indian government debt with concern. In recent weeks, the difference between yields on the 10-year government paper (government securities or G-Secs) and the two-year variant has widened the most in nine years, since the high-spending days of the post-financial crisis fiscal stimulus. This is a result, in all likelihood, of worries that in spite of there being practically no fiscal space, the government will feel itself forced to stimulate the economy through some spending or tax measures as a response to stalling gross domestic product (GDP) growth. A difficulty in