In recent days, I have written twice about debt inflows: about the RBI policy framework on debt inflows, and about SEBI's implementation of these policies. On 13 April, Andy Mukherjee has written a column on Bloomberg on these issues.
The policy alternative that is being discussed is that of removing all restrictions on FII purchases of INR denominated bonds (whether GOI or corporate), and having controls on foreign currency borrowing. The key question that Andy asks is: What's in it for India? My response would be in two pieces. First, the proposal is superior because it avoids the currency mismatch on the part of firms that's caused by the present framework. A shift to INR denominated debt is safer. Second, it will foster the development of a local bond market, which is an essential element of financial globalisation.