Fund mobilization by Indian companies by selling dollar-denominated bonds went up by about 90% to a record high of $15.2 billion in 2017, according to Bloomberg data.

There could be two ways of looking at this development. First, this is welcome in the sense that it is not only allowing Indian companies to mobilize funds at a cheaper rate, but is also helping fund investments at a time when a large part of the Indian banking system is reluctant to lend.

The stable domestic macroeconomic environment, upgrade in credit rating and the appetite for Indian paper in the global market are likely to enable more companies to raise dollar debt.

The second view could be that increasing reliance on foreign sources for debt capital has risks. The inflow of a large amount of foreign debt could increase external liability, put pressure on the rupee and affect exports. In 2017, the Reserve Bank of India made large interventions to keep the currency stable.

The upshot: policymakers need to carefully weigh the costs and benefits of foreign debt in the present economic circumstances.