In Modi's 4 years, India forgot that crude is the biggest bond vigilante

The 10-year U.S. bond yield breaking through the 3 percent danger level worries India, as it does every emerging market. Still, the price that sends policymakers in New Delhi and Mumbai into paroxysm isn’t that of global capital, but of a commodity: oil.

With Brent crude flirting with $75 a barrel, the panic is already beginning to show. Crucial state polls in Karnataka are due next week and general elections are only a year away. No surprise then that the Indian government appears to have instructed state-run oil marketers who control most retail sales not to raise pump prices.
The price caps, as Bloomberg Intelligence analysts note, will have either of two effects: Year-end dividends from oil companies to the taxpayers will be hit as their earnings collapse; or, if the government chooses to cut $44 billion in excise duties to spare consumers the burden of costlier crude, its revenue will take a more direct blow.
India’s bond market is already jittery about fiscal slippage. To that, add the inflationary impact of costlier gasoline and diesel. (Suppressing pump prices for a while merely postpones the inflation spike.) Reserve Bank of India Deputy Governor Viral Acharya’s comment at the last monetary policy meeting that his next vote could be for raising interest rates hasn't gone down well with the market.