New Delhi, Sept. 8 -- 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-a-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...