India, running out of options to avoid a full-blown currency crisis, may resort to selling a foreign-currency sovereign bond to raise much-needed foreign capital and finance a yawning current account gap.
But analysts and economists warned such a debt issue is a risk-fraught proposition, and may reinforce widely-held perceptions amongst investors that the government is relying on quick fixes rather than deeper structural reform to correct the current account deficit.
“Sovereign bond issuance could help raise capital inflows but it is not sufficient to tackle the balance of payment challenges that India face at the moment,” said Leif Eskesen, Chief Economist for India at HSBC.
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