Impact on the government The Government of India does not raise resources from the international capital markets to finance the fiscal deficit, though the bilateral and multilateral sources do provide moderate amount of foreign currency funds. The Government could, therefore, be affected indirectly through the spill-over impact of external developments on domestic interest rates.
What is of relevance, inter alia, is the nominal international interest rates and domestic interest rates, adjusted for inflation differential. To the extent there is a rise in domestic interest rates, there could be an increase in the cost of government borrowings of the Government.