Sovereign bonds: The big picture

India must work on a road map towards capital account openness, in which sovereign bond is back-loaded, not front-loaded

A lot has been said about the case for and against the Budget proposal to issue sovereign foreign currency denominated bonds. It is difficult to add much to the debate by way of arguments. Yet, there is a big picture consisting of bits and pieces that may help in finding a wise way forward.

In global financial markets, sovereign debt is very different from non-sovereign debt. Crucially, the sovereign is not a limited liability entity. It exists in perpetuity and its assets are somewhat indeterminate. Its liabilities to non-residents in global financial markets are, in most cases, governed by laws other