The Confederation of All India Traders (CAIT) has lauded the announcement of issuing Overseas Sovereign Bonds In recent budget. It’s a progressive move of the Government that without disturbing domestic capital market, the government is giving space to private enterprises to raise funds from domestic market and the government will raise funds from global market through such bonds- said, B C Bhartia, National President and Praveen Khandelwal, Secretary General of CAIT today in a joint statement.
A government bond or sovereign bond is a form of debt that the government undertakes wherein it issues bonds with the promise to pay periodic interest payments and also repay the entire face value of the bond on the maturity date. So far, the government has only issued bonds in the domestic market.
Both Bhartia and Khandelwal while terming it as a visionary step of the Government said that Overseas Sovereign Bonds are designed to capture funds from overseas against debts and leaving the domestic market for private enterprises for raising funds. It seems to be an ideal situation for domestic players. It is important to see at what interest rate the Bonds are be sold which is linked to risk factor. If the rate at which India can borrow overseas is low, then this would mean the global market gives a low risk to India but if the rate of interest is high than it could be volatile situation for the Country.
Govt feels that currently borrowing is at such a level that there are not enough funds available for the private sector to adequately meet its credit and investment needs. If the private sector cannot borrow adequately, then it cannot invest as it wants to, and that cripples one major engine of economic growth.
The ideal situation is that the government must be vested with sufficient funds so that it not need to borrow but since both direct and indirect tax collections are not up to the mark, it is compelling the Govt to borrow to meet its expenditure and leaving the domestic market for private players for funds.
Bhartia and Khandelwal said that if we don’t pump in already 300 billion USD in the economy we will go into recession…the economy is tottering and half the sectors are showing big minuses…our sovereign borrowing is very low…and our trade and business is facing rapacious tax authorities which is putting everything in a tail spin…no scope to squeeze any more tax.
Our banking system has collapsed…we will get into recession and depression if we do not stimulate the economy…sovereign borrowing of $300 billion is just 11% of GDP. Therefore we must borrow and pump into our economy. Building global domestic champion cos and getting global cos to make India a global mfg hub are the two most crucial things which may be achieved by this move of the Government.
The trade leaders said that every country in the world needs foreign currency to strengthen its progress and economy. Prime Minister Narendra Modi is moving forward to make our country the third largest economic power in the world. We need capital goods today in our country. To stay international, we need to have international approach .All these things should be a treasure of foreign currency. Forex should also be such that it has been with us for a long time. There is no problem to return. Today, our country’s heritage is working in our human resources assets throughout the world. People of our country are employed at large and high levels across the globe and earning substantial money. He With Sovereign Bonds will be able to make investments in our country and help the country to accelerate the economy of the country. The important thing is that these bonds will be paid after several years.
Our personal belief is that the rupee will further strengthen. Indian currency will be stronger than the dollar. In this situation, the money we are taking through Bond today, when it comes time to return, the money will be returned in less Indian currency. It seems that its burden will not come at all. It is important to remember here that during 1990 -91 and 1992 if the gift was coming in foreign currency, the government was not asking about it. A lot of money came into our books without our income. The rate of income tax was 40/45%. So India suffered a loss of such rupee. There is no talk of any kind of black money etc. Similarly, when we first needed, we brought foreign currency by pledging our gold abroad. No foreign countries take foreign currency as loans. When foreigners lend a loan, their condition puts you in such a condition that you will have to do this. There is no such condition when it comes to shopping, it is also a big thing in itself, therefore, the government’s decision to give sovereign bonds to bring foreign currency into their country is a very good thinking and it is our long-term thinking. The country will get great benefits.