Indian companies are set to boost overseas borrowing by the most in three years as optimism in the government’s economic policies helps cut debt costs, according to the head of an Asian industry body.

Foreign-currency loans will jump 40 percent from last year to $35 billion in 2014, according to Atul Sodhi, head of the Asia-Pacific Loan Market Association. Companies raised $15.5 billion in the first half, the most since the six months ended December 2011, according to data compiled by Bloomberg. Tata Steel Ltd. and Indian Oil Corp. lead planned financing, after the average premium on non-rupee loans dropped to 171 basis points in January-June from 291 in the same period last year.

India’s economic expansion will rebound under new Prime Minister Narendra Modi to 5.4 percent in 2015 from near the slowest in a decade, according to the median estimate in a Bloomberg survey, as acquisitions by the nation’s companies more than doubled this year. The government’s budget unveiled last week stuck to plans for the narrowest fiscal deficit since 2008.

“Optimism that the new government will revive investment in the economy and work toward fiscal consolidation are positive indicators,” said Sodhi, who is also the Hong Kong-based managing director and global loan syndication head at Credit Agricole CIB. “Indian markets are in a good spot now and this is having a positive impact on the sentiment toward Indian borrowers from international lenders.”

Tata Steel, the nation’s biggest producer of the alloy, plans overseas funding of $3 billion to refinance debt taken to fund the acquisition of Corus Group Plc in 2007, three people familiar with the matter said last month. That would be the largest overseas loan by an Indian company in 2014, data compiled by Bloomberg show. State-owned explorer Oil & Natural Gas Corp. raised $2.5 billion this year.

International debt has become more attractive as swings in the Indian rupee declined to the lowest in almost three years after the Reserve Bank of India raised interest rates and curbed gold imports. Three-month implied volatility, a gauge of exchange-rate movements used to price options, has slumped 410 basis points this year to 7.56 percent, according to data compiled by Bloomberg. The measure touched 7.52 percent on June 13, the least since August 2011. (Bloomberg)