In an indication that the government might go for a sovereign bond issue as the rupee stays under pressure, the finance ministry on Monday said all options were being considered. More dollar inflows through a bond issue would help arrest rupee depreciation.
The ministry issued a denial of reports by some news channels and agencies that the government had shelved plans for a sovereign bond issue. "Some of the news channels/news wires have been misreporting the government is no longer contemplating (this)... These reports are without any basis. As the finance ministry has said repeatedly, all options are on the table and are examined from time to time," it said, adding steps are taken at appropriate times and "such misreporting creates unnecessary speculation".
The government has been trying to tide over the slump in the rupee. Issuing of bonds to non-resident Indians (NRIs) by either the government or through state-run banks is one of the options. According to estimates, India can mop up $20 billion from NRI bonds. The government had used a quasi-sovereign bond issue option as a tool to stem a rupee fall on three prior occasions. Funds were raised through India Development Bonds in 1991, Resurgent India Bonds in 1998 and India Millennium Deposits in 2001. Banks raised $1.6 bn, $4.8 bn and $5.5 bn, respectively, from these issues.
A new issue would also help finance the high current account deficit (CAD), amid dwindling capital flows. In 2012-13, the CAD hit a record high of 4.7 per cent of gross domestic product. The rupee has depreciated by 12 per cent against the dollar since the beginning of this financial year on April 1. It hit an all-time low of 61.21 a dollar on July 8, forcing the Reserve Bank of India and the Securities and Exchange Board of India to step in.
