Traditionally, government raised cheaper funds from international markets by offloading sovereign bonds.
The move will free up additional liquidity in the domestic market. However, it is expected to impact the Indian rupee and G-sec Bond yields.
"India's sovereign external debt to GDP is among the lowest globally at less than 5 per cent," She said in her maiden Budget speech to Parliament on Friday.
"The government would start raising a part of its gross borrowing programme in external markets in external currencies. This will also have beneficial impact on demand situation for the government securities in domestic market."
India Inc welcomed the announcement with industry body CII Director General Chandrajit Banerjee saying: "Government's intent to raise a greater part of its borrowing requirements internationally, will have a positive effect on government yields with a benign impact on interest rates."
"It will also reduce the crowding out the effect of government borrowing, making more capital available for private investments."
Lakshmi Vilas Bank Head of Treasury R.K. Gurumurthy said: "Fiscal deficit and gross borrowings are in line with pre-Budget expectations. Additionally, some part of borrowings within the gross borrowings is estimated to be raised overseas. So the pressure on domestic liquidity is that much less."
The Indian rupee can gain a bit on the back of this development. However, most of today's reactions could reverse as timing is key, he added.
"Bond yields were expected to touch 6.50 per cent and today's low was close to that. Bias remains for softer yields this quarter," Gurumurthy said.
( With inputs from IANS )