India’s federal government has unveiled a record borrowing plan for the 2026–27 fiscal year, underscoring both its push to accelerate economic growth through manufacturing and the mounting pressure on domestic bond markets already grappling with heavy debt supply.

In her annual budget speech on Sunday, Finance Minister Nirmala Sitharaman said the government will borrow 17.2 trillion rupees ($187.6 billion) in gross terms in the next fiscal year, which runs from April 2026 to March 2027. That figure marks a 17% increase from the 14.61 trillion rupees planned for the current fiscal year and exceeds most market expectations.

Net borrowing is also set to rise, to 11.73 trillion rupees from 11.33 trillion rupees this year, reflecting the government’s continued reliance on debt even as it commits to fiscal consolidation over the medium term.

The borrowing numbers came in above the median estimate of 16.3 trillion rupees in a Reuters poll of 35 economists, and toward the upper end of forecasts that ranged from 16 trillion to 17.5 trillion rupees. The surprise has heightened concerns in financial markets about the government’s ability to place such a large volume of bonds without pushing yields even higher.

Government bond yields have already been under upward pressure for months, as borrowing by both the federal government and Indian states has outpaced demand. Traders say the new borrowing plan risks exacerbating that imbalance. With bond markets closed on Sunday, attention has shifted to Monday’s reopening, when the benchmark 10-year yield is expected to face fresh upward pressure.

Market participants warn that the scale of issuance could keep yields elevated, even after unprecedented intervention by the Reserve Bank of India. In recent months, the RBI has stepped in with record open market bond purchases and foreign-exchange swaps to inject liquidity and stabilize the market.

“The overall gross and net borrowing numbers, along with the lack of any specific measures to address demand for bonds, will clearly weigh on the market,” said Rajeev Radhakrishnan, fixed income chief investment officer at SBI Mutual Fund.

He added that near-term bond market stability will continue to depend heavily on the central bank’s operations to anchor yields.

“The borrowing remains a challenge and could keep yields elevated relative to underlying macroeconomic numbers,” Radhakrishnan said.

The borrowing plan sits alongside a budget that doubles down on local manufacturing as a growth engine for Asia’s third-largest economy, at a time of global volatility and slowing external demand. Sitharaman framed the strategy as a necessary bet to strengthen domestic supply chains, attract investment, and protect India’s growth momentum from global shocks.

At the same time, the government is attempting to balance stimulus with fiscal discipline. New Delhi has shifted its fiscal framework toward targeting the debt-to-GDP ratio rather than focusing solely on the annual deficit. Under the new plan, the government aims to reduce its debt-to-GDP ratio to 55.6% in the next fiscal year, which translates into a fiscal deficit of 4.3% of gross domestic product.

The fiscal deficit, which measures the gap between government spending and revenue, is closely watched by investors and ratings agencies for its implications for borrowing needs, debt sustainability, and market confidence. While the deficit target signals an intent to rein in public finances over time, analysts note that the near-term borrowing burden remains heavy.

For bond investors, the central question is whether demand — from banks, insurers, foreign investors, and the RBI itself — can absorb the record supply without a sharp rise in yields. Higher yields would increase the government’s interest costs and could spill over into broader borrowing costs for companies and households, potentially complicating the growth push the budget is designed to support.

As trading resumes, markets are expected to scrutinize not just the headline borrowing figures, but also signals from the RBI on how aggressively it is willing to intervene to prevent a disorderly rise in yields. But what India’s budget has made clear for now is that growth ambitions and fiscal consolidation will have to coexist with record levels of government borrowing.

Global aviation is set to extend its post-pandemic recovery into 2026, with passenger numbers and cargo volumes still climbing, even as profitability remains fragile and uneven across regions.

New projections from the International Air Transport Association (IATA) show an industry that is growing, but only just holding its financial footing, with Africa standing out as a region where demand is rising faster than the global average, while earnings lag far behind.

IATA projects that global passenger traffic will increase by 4.9% in 2026, while cargo volumes are expected to grow by 2.4%. The outlook was outlined by IATA Director General Willie Walsh during his address at the Changi Aviation Summit 2026 in Singapore, where he described the coming year as one of continued progress, but warned that airlines are still operating with little margin for error.

Walsh framed 2025 as a relatively strong year for aviation. Global passenger traffic grew by 5.3%, underpinned by a solid rebound in international travel, which expanded 7.1%. Domestic markets grew more slowly, at 2.5%, reflecting maturity in key markets and cost pressures that constrained capacity. Cargo volumes rose 3.4%, but the recovery was uneven across trade lanes. Shipments between Asia and North America fell by 0.8%, weighed down by trade frictions and softer consumer demand, while cargo volumes between Europe and Asia surged 10.3%, benefiting from rerouted supply chains and stronger industrial activity.

Against this backdrop, IATA’s 2026 forecast points to moderation rather than momentum loss. Passenger growth of 4.9% and cargo growth of 2.4% are slightly below 2025 levels, but still represent a healthy expansion in an industry facing geopolitical tensions, volatile fuel prices, supply chain constraints, and currency swings.

Walsh said the numbers remain encouraging, noting that while growth is easing, it continues to provide a meaningful advantage for airlines navigating a complex operating environment.

Yet the headline growth masks a deeper concern: profitability remains stubbornly thin. IATA estimates that the global airline industry will earn about $41 billion in net profit in 2026. While the figure sounds substantial, it translates into a net margin of just 3.9% and an operating margin of 6.9%. On average, airlines are expected to make only about $7.9 in profit per passenger, leaving the sector highly exposed to shocks such as fuel price spikes, geopolitical disruptions, or sudden demand slowdowns.

Africa encapsulates this imbalance more clearly than any other region. Passenger traffic on the continent is forecast to grow by 6% in 2026, outpacing the global average. Capacity is expected to expand by 5.7%, signaling cautious confidence among airlines. However, despite faster traffic growth, African carriers are projected to generate a combined net profit of just $0.2 billion. The region’s net margin is expected to remain negative at -1%, with revenue per passenger estimated at only $1.30.

The core issue is cost. IATA data show that African airlines face the highest unit costs in the world, at 140 US cents per available tonne-kilometre, nearly double the global average. Aging aircraft fleets drive up maintenance expenses, while fragmented markets prevent airlines from achieving scale efficiencies. Regulatory barriers, limited liberalization of airspace, and restrictive bilateral agreements further constrain route optimization and network growth.

Beyond airline-specific challenges, broader structural factors continue to weigh on African aviation. Low GDP per capita limits discretionary travel, visa restrictions suppress intra-African mobility, and high passenger charges inflate ticket prices. Corporate tax rates averaging around 28% add another layer of pressure in an industry already operating on slim margins.

Nigeria provides a revealing case study of how these constraints play out in practice. According to the President of the Aircraft Owners and Pilots Association of Nigeria, Dr. Alexander Nwuba, domestic airlines earn only about N8 per kilometer flown. He explained that it costs roughly N104 per kilometer to operate a domestic flight, while average revenue stands at around N112 per kilometer. This narrow spread leaves airlines extremely vulnerable, even with air fares at elevated levels.

Dr. Nwuba also pointed to the small size of Nigeria’s air travel market. Only about 0.02% of Nigerians fly annually, a stark contrast to Europe or the United States, where air travel penetration is far higher. This limited demand makes it difficult for airlines to achieve economies of scale, spread fixed costs, or invest aggressively in fleet renewal. High aviation fuel prices, limited aircraft availability, a weakened naira, and multiple aviation charges further squeeze margins.

However, while IATA projects that demand will continue to grow, and passenger numbers are expected to rise across most regions, financial resilience remains elusive. For Africa, stronger traffic growth alone is not enough to deliver sustainable profitability. Without structural reforms to address costs, taxation, infrastructure gaps, and regulatory fragmentation, airlines on the continent will continue to carry more passengers while struggling to convert that growth into durable financial gains.

This means that growth is no longer the primary problem of the industry, particularly in regions like Africa, where the appetite for air travel is rising faster than the economic foundations needed to support it. The challenge now lies in ensuring that growth translates into viable and resilient airlines.