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In Top Bureaucrat's Transfer, Link Seen To Sovereign Bond Plan: 10 Points

The government's plan to issue such bonds has been opposed by several experts who believe that such a move would push the country into a debt trap.

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The overseas bond plan to issue was announced by Finance Minister Nirmala Sitharaman in her budget speech

The Prime Minister's Office (PMO) wants the Ministry of Finance to reassess the idea of issuing foreign currency overseas sovereign bonds and seek wider consultation from stakeholders, news agency Reuters reported on Thursday quoting sources. The government's plan to issue such bonds, announced by Finance Minister Nirmala Sitharaman in her budget speech, has been opposed by several experts who believe that such a move would push the country into a debt trap. The government was earlier said to be considering an option to raise $10 billion in one go as early as October.
Here are 10 things to know about this big story:
  1. Reports about Prime Minister Narendra Modi's office calling for a review emerged after senior bureaucrat Subhash Chandra Garg was shifted from the finance ministry to the power ministry on Wednesday.
  2. News agency IANS quoted sources as saying Mr Garg's shift was linked to the fact that the PM's office was "unhappy" about the bond proposal.
  3. The Prime Minister's Office was not properly briefed about the consequences of overseas dollar-denominated bonds by Mr Garg, who had originally pushed this idea, the agency quoted sources as saying.
  4. The Finance Minister announced the offshore bond sale plan in the budget, amid shrinking options to raise funds to boost spending on infrastructure.
  5. The idea has been criticised by former heads of the Reserve Bank of India, economists and allies of the ruling BJP alike; they argue it could create long-term economic risks by exposing the government's liabilities to currency fluctuations.
  6. As an alternative, the government could raise funds through rupee-denominated bonds in the overseas market instead, Reuters quoted a source who is an adviser to the government.
  7. Mr Garg - who was the senior-most bureaucrat in the Finance Ministry - applied for voluntary retirement on Thursday, becoming the first Finance Secretary to do so in 19 years. If his request is accepted, he will leave government service more than a year before his scheduled retirement.
  8. As Secretary in the Department of Economic affairs, he was in charge of fiscal policy, Reserve Bank of India-related matters, and was closely involved in the Budget.
  9. He was a central figure in the tension between the government and the RBI last year, which ended with the sudden exit of Urjit Patel as RBI governor in December.
  10. Declining to comment on the sovereign bond plan, Mr Garg said on Thursday that he had sought voluntary retirement but would serve out a notice period of three months and take charge as power secretary until then.




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Highlights

1
PMO wants finance ministry to seek wider consultation from stakeholders
2
Government announced offshore bond sale plan in Union Budget
3
Several experts believe foreign currency overseas bonds are a debt trap

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