NITI Aayog Vice-Chairman Rajiv Kumar made a strong case for setting up an independent debt management office, saying better servicing of loans could lead to substantial reduction in India’s interest payment.
At present, the government debt, including market borrowing, is managed by the Reserve Bank of India.
“Now the time has come to seriously consider better management of India’s debt servicing obligations…interest payment is such a large part of the revenue expenditure that better management of debt servicing could substantially reduce interest payment,” Kumar said.
Noting that India’s external debt is only 18 per cent of total GDP, the NITI Aayog vice-chairman said that when the RBI manages India’s debt then there is a conflict of interest.
“Because if you let more external people come and compete in government debt market then you get more foreign exchange, therefore exchange rate management gets problematic.
“So, therefore debt market remains confined to few domestic players…I think therefore time has come for this step to be taken in right earnest,” Kumar insisted.
Talking about India’s economic growth, he said this year (2018-19), the economy will grow at 7.5 per cent plus.
“By 2019-20, India will start growing at 8 per cent,” Kumar said.
India’s total debt is estimated at Rs 66.68 lakh crore at the end of March 2018, which is likely to go up to Rs 72.51 lakh crore by March 2019, according to the Budget document. The interest payment on the public debt is estimated to rise from Rs 5.3 lakh crore in 2017-18 to Rs 5.75 lakh in 2018-19.
In his February 2015 Budget speech, Finance Minister Arun Jaitley had proposed to set up a Public Debt Management Agency (PDMA) within the finance ministry.
The idea behind setting up of PDMA was to resolve issues relating to conflict of interest as the RBI decides on the key interest rates as well as undertakes buying and selling of government bonds.
Kumar also pointed out that presently tenants cultivators are not able to avail crop loans and other benefits like minimum support prices (MSP).
“In the next three months, NITI Aayog in consultation with state governments will evolve a suitable mechanism to enable access of tenants cultivators to bank loans without compromising the rights of the land owners,” he said.