Finance Secretary TV Somanathan said on Thursday that the Finance Ministry was not considering issuing foreign currency-denominated sovereign government securities and raising some of the government's market borrowing.
The move would involve both risk and return, Somanathan said, in response to a question at the post-budget interaction in Hyderabad. "There are some benefits, but there are also some negative effects in the region of self-reliance, sovereignty, and exposure to non-Indian risks, and there is a lot of worldwide experience on this."
Sovereign bonds are usually denominated in the currency of the issuing government. The proposal to issue U.S. dollar bonds was made by Finance Minister Nirmala Sitharaman in her first budget speech in 2019.
A proposal to raise up to $10 billion from overseas sovereign bond issues attracted a great deal of interest from investors and bond participants. However, it also received criticism from economists such as Raghuram Rajan.
"In this volatile world, central bank money can be stopped by a foreign country for political reasons, so this is not a simple question of yields alone," Somanathan said.
According to him, India is already open to foreign portfolio investment in rupee-denominated securities. "It's not as if the crowding out will happen because foreign money doesn't come in. Foreign money is coming into the rupee-denominated securities market," he said.
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