NITI Aayog Vice Chairman Rajiv Kumar on Friday made a strong case for setting up of an independent debt management office outside the purview of Reserve Bank of India, saying it was “an idea whose time has come”.
The idea of a Public Debt Management Agency (PDMA) was proposed by Finance Minister Arun Jaitley in his February 2015 Budget speech, though it has not yet been implemented.
“…It is important for this particular office to be separate because then you can pay much more attention to public debt management. That will help the government in bring down cost of its debt,” Kumar said at an event organised by NITI Aayog.
At present, the government debt, including market borrowing, is managed by the Reserve Bank of India (RBI).
The government has to decide how to segregate different functions of the RBI, Kumar said adding that government been very courageous to give the central bank the statutory authority for the inflation targeting.
“Therefore, who then looks after growth, employment, debt and other legal things etc. in the country? I think those are the things that need to be discussed,” he argued.
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 to buy and to sell of government bonds.
Referring to the banking sector, Kumar said that India needs global-size banks to take advantage of economies of scale.
Kumar suggested that this could be done either by capital infusion in banks or further merger (of banks).