‘Sovereign bonds: All options are being considered’

On the much-debated issue of foreign currency sovereign bonds, Chief Economic Advisor Krishnamurthy Subramanian on Friday admitted that a deep thinking was underway in the government about the issue and all options will be considered.

During a media interaction here, Subramanian said, “Adequate thought will be put into this and all the trade-offs involved will be considered.”

When asked whether the government was reconsidering its plan to float such bonds, Subramanian stated that all options are being considered at present.

“Currently, all the options are being considered such as rupee vs dollars and the costs and benefits involved (in issuing these bonds) will be considered. We will be thinking deeply about it and all options will be considered,” he told media persons before delivering 16th Dr RL Sanghvi Endowment AMA Annual lecture on Economics in Ahmedabad.

He, however, declined to speculate on any timeline on the final decision on the issue.

Notably, the ruling BJP is also said to be discussing the matter at the Party forum.

Growth targets

On the GDP growth estimates of 7 per cent for the year 2019-20, the CEA stated that the target will be achieved, for which the government has laid out a strategic blueprint through the Economic Survey tabled in Parliament earlier this month.

“We have laid out the blueprint of the investment-driven virtuous cycle, which is important if you look at countries that have grown over long periods at high growth rates, which has always been on the back of investments,” he said adding that investment leads to productivity improvement, which boosts exports and jobs.

“And the increase in exports and jobs creates purchasing power, which in-turn creates demand and anticipating that demand, firms invest more. That's how the virtuous cycles proceed, when economies do well," said Subramanian.

When asked about the Budget announcements addressing these requirements, the CEA said, "The part A of the speech focuses substantially on investments. In fact if you notice, the word investment appeared in the speech appeared close to 30 times. In the Budget, there are a lot of steps taken (such as) package of proposals for startups, FDI and FPI both of which together have created an environment for investments. The does budget take into account significantly the fact that virtuous cycle has to be triggered.”

The CEA, however, said auto sector job-losses are cyclical issues in a market-driven economy.

“In a market driven economy, there are sometimes some sectors that go through cycles. That is inevitable in any economy across the world. And we also have to be careful, that you can’t always intervene in a market economy.”

"As a policy maker, it is important to have this hypocratic oath that if you can not, through your intervention, resolve, you don't want to create more harm. The moral hazard that gets created sometimes, that we have to be careful about. Interventions in a market economy have to be limited to only in cases where there is possibility of contagion. I don’t see that is the case in some of these sectors,” he said adding that the Indian economy was very resilient.

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