India needs more foreign capital to fund record borrowing, says IDFC

A bond fund manager who correctly predicted that the central bank would introduce a US Federal Reserve style Operation Twist, now says that the nation needs more foreign capital to fund its record borrowing.

India’s borrowing may rise to Rs 7.6 trillion ($107 billion) for the fiscal year starting April 1, according to Suyash Choudhary, head of fixed income at IDFC Asset Management. The market can only handle it if more foreign investors are allowed to participate and the central bank continues its Operation Twist, where it buys longer-maturity bonds and sells shorter-term ones.

Otherwise, the large borrowing size “will be a huge cause for concern,” Choudhary said, adding that the long end of the sovereign bond curve may remain volatile and the benchmark 10-year yield could rise over the 6.75 per cent mark.