Expensive oil and weak rupee have increased the government’s tension, will the common people’s pockets be hit hard again? Expensive oil and weak rupee increased the tension of the government, will there be a big blow to the pockets of the common people again?

The rising crude oil prices in the global market and the continuously weakening rupee against the dollar have created a new challenge for the Indian economy. Due to the combined effect of these two factors, the fear of further increase in Government Bond Yield has deepened. Market experts believe that if this situation continues, there may be turmoil in the domestic financial market in the coming days, due to which the risk of loans becoming expensive will also increase.

All-round pressure of crude oil surge and rupee weakness

The increase in international crude oil prices has always been a matter of concern for a big importing country like India. Due to oil becoming expensive, not only does the country’s import bill increase, but it also has a direct impact on the current account deficit (CAD). Along with this, the decline in the Indian Rupee against the US Dollar has added fuel to the fire. Due to weakening of rupee, imported goods become more expensive, which can have a direct impact on the retail inflation of the country. Due to both these reasons, the pressure on the macroeconomic equations of the country has increased considerably.

Meaning of rise in government bond yield and its big signs

In this period of economic uncertainty, government bond yields are continuously rising. The rise in bond yields indicates that investors are now demanding higher returns on government securities. When bond yields rise, it becomes expensive for the government to borrow from the market. This also has a direct impact on the interest rates of banks. If this surge in bond yields continues, liquidity in the banking system will be affected and banks may increase their lending rates, making all types of loans more expensive.

Impact on financial markets and the way forward

Market experts say that due to global geopolitical tensions and the policies of the US central bank Federal Reserve, the dollar is also getting stronger, due to which the rupee is under constant pressure. The Reserve Bank of India (RBI) is keeping a close eye on the situation, but controlling crude oil prices is extremely challenging. If crude oil prices remain above $90 per barrel in the coming time, then the selling pressure in the Indian bond market may increase further, which will lead to further improvement or increase in yields. Investors are being advised to decide their strategy keeping in mind global signals.