● Fluctuations in exchange rate may lead to an increased pay out pressure on the issuing government. ● The issue of international sovereign bonds will have several long-term implications. ◦ It may facilitate the inclusion of India’s government bonds in the global debt indices. ◦ India’s representation in global debt market indices is small compared to other emerging markets. ◦ This may lead to higher foreign inflows into India. Hence, Option 1 is correct. ● Two, inclusion in global benchmarks would also improve the attractiveness of rupee-denominated sovereign bonds . Hence, Option 2 is correct . ● Three , the rates at which the government borrows overseas will act as a yardstick for pricing of other corporate bonds, helping India Inc raise money overseas. Hence, Option 3 is correct. ● While some commentators think that the government can borrow at very low costs overseas, this argument is weak, as it will have to hedge against forex risks.