Yashwant Sinha pans sovereign bonds idea

Says it’s a fraught enterprise in the climate of a trade war, and unnecessary exposure to global market

July 13, 2019 09:54 pm | Updated 09:54 pm IST - NEW DELHI

Yashwant Sinha. File

Yashwant Sinha. File

Former Union Finance Minister Yashwant Sinha has expressed concern over the Union Budget proposal of floating sovereign bonds.

Speaking to The Hindu on the eve of the launch of his autobiography, Relentless: An Autobiography (Bloomsbury), Mr. Sinha said the government’s plans for sovereign bonds was something that had not been done by any government since 1947, and was a fraught enterprise in the current climate of a global trade war, and unnecessary exposure to the global market.

Even in 1991, in the face of the balance of payments (BoP) crisis, India did not go in for it, he said. “There are three types of external borrowing: one is the Indian private sector borrowing abroad as well as public sector, the second is what I and Dr. Manmohan Singh also did, which was the Resurgent India and Millennium Development Bonds, which were not sovereign bonds, but were issued by the SBI, the third type is sovereign bonds where any government issues a bond in its name. This we haven’t done since 1947, for some very solid reasons. It was suggested to me in 1998 by investors and economists abroad that we should but the idea was discussed and discarded. Instead we decided that the SBI would issue the bonds preventing the country’s reputation, its global reputation from being on the line and you avoid being exposed to the vagaries of the global market as well,” he said.

“The current government is saying they need to supplement resources, but I feel we could raise it here, domestically. I don’t know who gave the government this idea, as we are increasing our exposure to the global market at a time when there is a trade war on between the U.S. and China and between the U.S. and us as well. You never know what might happen, the rupee is semi-convertible and there may be pressure on that. By bonds like Resurgent India, et al, you are injecting money straight into the banking system,” he said.

Not a budget at all

Mr. Sinha, who presented the largest number of Budgets in non-Congress led governments, also described the last Budget speech as “not a budget at all”.

“Under the Constitution, it [Budget] is a statement of annual accounts, over a period of time, it has changed a bit but this year it has changed completely and there is no difference between the Budget and the President’s Address to both Houses of Parliament. The difference between the two used to be that the President can say what he is told to say about the future course of the government etc, but he does not have to specify where the money is going to come from. A Budget will not be a worthwhile Budget unless it provides for every service. Service means every scheme, and that is why we have the provision of making even token allocations, you can make a provision of one rupee but it has to be made. You can’t have a bland statement saying we will do this and that and not say where the money will come from,” he added.

Dialogue with the deaf

Mr. Sinha in his book also describes himself as a bit of a hawk with regard to Pakistan and terms attempts at dialogue with that country as “a dialogue with the deaf”. He goes into details about his own stint as the External Affairs Minister at a time when relations had hit a low with Pakistan, and adds that the January 6, 2004 joint press statement by India and Pakistan declaring that the latter must eschew violence against India before any dialogue was a principle that should guide relations with that country, but that it got derailed by the UPA government. He added that his subsequent interactions even at non-official levels with Pakistani MPs was testy and like a “dialogue with the deaf”.

“The policy of “no talks with terror” is, however, also dependent on the fact that we would be able to safeguard ourselves. In all these years we have not been able to protect ourselves from terrorism in the manner in which the U.S. has done. You have to be strong and protect yourself fully and then you can pursue the policy of benign neglect,” he added.

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