Foreign Currency Borrowing by Indian Firms: Towards a New Policy Framework
Foreign Currency Borrowing by Indian Firms: Towards a New Policy Framework, Ila Patnaik, Ajay Shah and Nirvikar Singh. India Policy Forum, Volume 12, Page 139-174, March 2016
India has a complex multidimensional system of capital controls for foreign currency borrowing by firms. In this paper, we summarise existing regulations, review the outcomes and discuss areas of concern and recent policy changes. Unhedged foreign currency exposure for firms, the complexity and uncertainty in the policy framework as it has evolved, and questions about regulation making processes are highlighted. In an emerging economy with a managed exchange rate and incomplete markets, foreign currency borrowing poses systemic risks when left unhedged by large firms that constitute a significant part of GDP. We identify policy directions to help address these concerns.
- Doing everything wrong on foreign borrowing by Ajay Shah, in Business Standard, 4thApril 2016.
- Foreign Currency Borrowing by Indian Firms: Towards a New Policy Framework by Ila Patnaik, Ajay Shah and Nirvikar Singh, on Ajay Shah's blog, 3rdApril 2016.