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The case for India to revive plans for a $10-billion overseas bond sale is building up again. After all, Finance Minister Nirmala Sitharaman just announced a cut in corporate taxes that would cost the government about $20 billion in revenue. Fears that the Budget deficit will blow out sent the benchmark bond yield surging by the most since February 2017.
Enter the much-anticipated overseas bond sale, which since an announcement in July, has drawn so much criticism from former central bank officials and politicians that it was put on the back burner. “Now would be a good time to revisit it,” said Paresh Nayar, head of currency and money markets at FirstRand in Mumbai.
Foreign bond issuance is like a trump card with the government, which could take some pressure off the domestic bond market that’s shaken by this surprise move, he said.
India’s benchmark 10-year bond yield surged as much as 24 basis points to 6.88 per cent on Friday as the government cut tax on local businesses to one of the lowest rates in Asia.
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