A proposal for sovereign foreign borrowing that first found mention in the 2019-20 budget is back on the table at the finance ministry, and could figure in the government’s annual accounts statement next year, two people familiar with the development said. A foreign borrowing will secure cheaper overseas money, and ensure that large government borrowing does not drive up domestic interest rates.

                           

“It’s still in the initial stages. The proposal just doesn’t have economic but political aspects too. Hence, it will undergo close scrutiny before a decision to include it again in the budget is taken,” one of the two people cited above said on condition of anonymity.

India’s sovereign external debt to GDP is at less than 5%, among the lowest globally, and thus, supporters of the plan argue, it would be easy for the government to service the borrowing. The government’s present liabilities extend to debt that matures in 2055, and several of the long-term borrowings are at high interest rates. A reduction in the cost of this debt would significantly lower the interest burden.