India is seriously weighing the option of joining the global bond indices for emerging economies to boost capital inflows and shore up the rupee.
Finance ministry officials are planning to work out the modalities with investment bankers such as JP Morgan, Citi and Barclays who run such indices globally.
For the plan to materialise, the Centre will have to remove FII limits in government debt, which now stands at $30 billion.
Mayaram also said that the $1 billion rupee-denominated bond issue by International Finance Corp (IFC), the investment arm of World bank, will be taken as a test case. The first overseas rupee bond is being issued by the IFC. We want to see how it goes, what is the experience from that. Once that experience is gained, the direction is that to permit Indian firms to issue rupee-denominated bonds overseas, he said.
Once this is done, we will see what the experience is and then take a decision whether Indian firms should be allowed to do this or not. But certainly we have very much under consideration the request of Indian government to float bonds overseas.
After the $1 billion rupee-linked bond issue, IFC plans about $5 billion worth of similar issues over the next decade. Additionally, the government is said to be considering membership of the worlds biggest bond settlement system, Euroclear Bank's settlement platform, to woo investment in sovereign debt.