Ahmedabad:Chief Economic Advisor to the Government, Krishnamurthy Subramanian, on Friday indicated that the government was not rushing into the idea of floating foreign currency sovereign bonds and “there is a deep thinking about the issue and all options will be considered”.
“Adequate thought will be put into this (sovereign bonds) and all the trade-offs involved will be considered,” Subramanian, who was here to deliver a lecture, told reporters.
The Union Budget of 2019-20 had floated an idea of proposing to fund the fiscal deficit by borrowing foreign savings by issuing sovereign bonds in foreign currency.The idea has generated stiff resistance from several quarters, including from within the ruling establishment.
Specifically asked if the government was reviewing and reconsidering the floating of such bonds, Subramanian said all options were being explored.
“Currently, all the options are being considered such as rupee versus dollars and the costs and benefits involved will be considered. We will be thinking deeply about it and all options will be considered,” he said, but declined to put a time frame on the issue.
Subramanian, who was to deliver the 16th Dr R.L. Sanghvi Endowment AMA Annual Lecture on Economics at the Ahmedabad Management Association, said he was confident that the GDP growth estimates of seven per cent for the year 2019-20 would be achieved and that the government had already laid out a strategic blueprint for this as articulated by the Economic Survey tabled in the 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.
Investment leads to improvement in productivity and this in turn fuels exports and jobs, according to him.
“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.”
The CEA also said that the “part A of the (budget) speech focuses substantially on investments”.
“In fact if you notice, the word investment appeared in the speech close to 30 times. In the budget, there are a lot of steps taken (including) package of proposals for start-ups, FDI and FPI both of which together have created an environment for investments. The budget takes into account significantly the fact that virtuous cycle has to be triggered.”
He said concerns regarding the job losses in the automobile sector were essentially 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,” the CEA pointed out.
“As a policy maker, it is important to have this Hippocratic 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 Indian economy was quite resilient.