New Delhi, July 12 -- The finance minister, Nirmala Sitharaman's proposal that the Government of India borrow in foreign currency is a bold move. To reap the benefits of foreign sovereign borrowing, fiscal discipline is an essential prerequisite. If markets suspect errors in budget estimates, off-budget borrowing, or delayed payments to achieve annual fiscal targets, it can make foreign markets mistrust the government of India and raise the cost of borrowing. While India has a Fiscal Responsibility and Budget Management (FRBM) Act and an inflation targeting monetary policy in place, it needs greater fiscal transparency.

Sovereign foreign borrowing in international markets would help in attracting more foreign capital and pushing up domesti...