Finance minister P Chidambaram on Monday met Prime Minister Manmohan Singh and later held discussions with Reserve Bank of India (RBI) governor D Subbarao amid speculation that India is set to float a sovereign bond that will allow the government to dig into the pockets of foreign institutional funds and savings of non-resident Indians (NRIs) to stem the rupee’s slide.
The rupee, which closed at 59.90 on Monday, has slid more than 13% since May, threatening to fan inflation further.
Besides attracting precious dollars, a sovereign bond will also help raise funds for building highways and also test international investors’ confidence in a slowing economy that grew at a 10-year low of 5% in 2012-13.
Chidambaram also briefed Singh about his recent visit to the US where he made a strong pitch about the Indian economy to investors and policy makers that included Treasury Secretary Jacob Lew and heads of several multi-national companies
Both Subbarao and Chidambaram will travel to Moscow to attend the G20 meeting of finance ministers and central bank governors on July 19 and 20.
Last week, chief economic adviser Raghuram Rajan met top foreign bank executives.
The Resurgent India Bond (RIB) 1998, and the India Millennium Deposit (IMD) 2000 were also similar bonds targetted at channelising NRI savings into India, but were of much shorter tenure of five years.
The current account deficit - the gap between dollar inflows and outflows-have hit a record high of 4.8% of GDP in 2012-13 and closing this gap is among the government’s immediate policy priorities.
Later Subbarao also met economic affairs secretary Arvind Mayaram, chief economic adviser Raghuram Rajan and additional secretary KP Krishnan.