Some experts suggest the government to raise investment limit of foreign institutional investors (FIIs) in corporate bonds help investment in the infrastructure sector.
They also want the government to raise investment limit of FIIs in government bonds as this would help in bringing foreign exchange which the country desperately needs to reduce the high current account deficit.
It is learnt that foreign pension funds, central banks and sovereign wealth funds are keen to invest in the Indian debt market which gives returns of over 8 per cent compared to the 3 to 5 per cent returns in other emerging economies.
At the end of November, the government raised the cap on FII investments and the flow of foreign investments has gone up in the last two months, reports indicate.
If the government further raises FII investment limit in government and corporate bonds by $5 billion each it would take the total foreign investment limit in domestic debt to $85 billion from $75 billion at present.
The move would bring more foreign exchange into the country at a time when the current account deficit is spinning out of control as exports have been shrinking in recent months and the price of India’s basket of crude oil imports continues to hover at a staggering $110 per barrel.
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