RSS wants government rethink on sovereign bonds

The people, none of whom wished to be identified, claimed the government is now examining all aspects of the proposal.
Finance minister Nirmala Sitharaman(HT Photo)
Finance minister Nirmala Sitharaman(HT Photo)
Updated on Jul 27, 2019 04:45 AM IST
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Hindustan Times, NEW DELHI | BySmriti Kak Ramachandran

The Rashtriya Swayamsevak Sangh (RSS) has asked the union government to reconsider its decision to raise money by selling foreign currency bonds. According to people aware of the development, the RSS, the ideological front of the Bharatiya Janata Party, held a closed door meeting with a group of economists here this week, to discuss the minutiae of sovereign bonds, announced by union finance minister Nirmala Sitharaman during the budget speech on July 5.

The people, none of whom wished to be identified, claimed the government is now examining all aspects of the proposal.

The people, who were present in the meeting, said the Swadeshi Jagran Manch (SJM), an offshoot of the RSS that was instrumental in organising the interaction, and which has been vocal in its criticism of the former governor of the Reserve Bank of India, Raghuram Rajan, concurred with his views that sovereign bonds are not good for India.

Rajan questioned the government’s decision to introduce the bonds, pointing out that the plan is “loaded with risks.”

While SJM’s national co-convenor Ashwani Mahajan declined to comment on the meeting, one of the attendees who asked not to be named said: “There was a meeting with the general secretary of the RSS, Suresh Bhaiyyaji Joshi, Rathin Roy, member of the PM’seconomic advisory committee, Sanjaya Baru, once media advisor to former PM Manmohan Singh were among those present. The conversation veered towards a consensus on the need for a rethink on the announcement.”

Baru said: “I was invited to a closed door meeting of the SJM and asked to express my views on the proposed dollar-denominated sovereign bonds. I have written on this in the media pointing to the potential risk and its signalling implications. I don’t think such a move is warranted.”

SJM has been vehemently against sovereign bonds. In a blog post published last week, Mahajan said if the government starts borrowing in foreign currency to finance its expenditure, we must be prepared for yet another risk: inflation.

“If the government borrows in foreign currency, then in order to spend it domestically it will have to get the same converted into rupee from the Reserve Bank of India. This is bound to increase the risk of inflation in the country. The government has been claiming to be fiscally prudent with lower fiscal deficit (it mentioned a fiscal deficit of only 3.3% in 2019-20). If we go on the path of foreign borrowing, there will be no benefit of keeping the fiscal deficit low. This phenomenon has been seen the world over, wherever foreign currency loans were raised,” he wrote.

The RSS has also conveyed to the government that is must take on board suggestions of other stakeholders, economists, monetary policy and international trade experts before taking a decision on the issue.

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