Will think 'deeply' on issuing sovereign bonds, says CEA Subramanian

The BJP-led govt announced in the Budget that it will raise a part of its market borrowing by issuing foreign exchange-denominated bonds in overseas markets

The government will "think deeply" on issuing sovereign bonds in overseas markets, said Chief Economic Advisor Krishnamurthy V Subramanian on Friday, speaking about a Budget proposal that analysts have cautioned against.
 

"All the options with regards to rupee versus dollar and its costs and benefits will be considered. Adequate thought will be put into this and all the trade-offs involved will be considered," Subramanian told reporters on the sidelines of a lecture.

The Bharatiya Janata Party (BJP)-led government had announced in its Budget on July 5 that it will raise a part of its market borrowing by issuing foreign exchange-denominated bonds in overseas markets. 

The CEA, however, refused to state any timeline for the same. "We do not wish to speculate on timeline." 

When asked about differences in gross domestic product (GDP) and fiscal deficit numbers amongst various constituencies including the Comptroller and Auditor General (CAG) and the government, the CEA reiterated the latter's views. For instance, while the CAG pegs fiscal deficit at 5.85 per cent, the government has estimated the same to be 3.46 per cent. "The difference in fiscal deficit is basically about the CAG has taken (sic) into account the extra-budgetary resources. If you look at the budget announcement, we have projected over 3.3 per cent fiscal deficit and we should be able to meet them," said Subramanian.

The CEA was in Ahmedabad for a lecture on strategic blueprint for achieving the $5 trillion economy target set by the government. However, commenting on job losses across sectors including automobile, Subramanian said, "In the medium to long run, if we have to grow at sustained rates then important steps need to be taken on private investment. In a market-driven economy, there are at times certain sectors that do go through cycles and that is inevitable. Across the world, there is an emphasis on more renewables and so these sectors get affected in a market economy and we have to recognise that." 

The government has, nonetheless, laid emphasis on greater formalization in the past and would continue to do so, the CEA said. "To what extent it will be overall, we don't know. At the end of the day we want to be a $5 trillion economy, whether it comes from sector x or sector y."

Meanwhile, commenting on the crises in the non-banking financial company (NBFC) sector, Subramanian said, "Budget has already announced steps on the NBFC where a window has been created, especially the 10 per cent guarantee. Steps have been taken and we have to let that run its course."