New Delhi, July 27 (IANS) Former Finance Secretary Subhash Chandra Garg’s tenure in finance ministry is believed to have been cut short by the RSS and its economic wing SJM for pursuing the foreign currency bond issue and there are indications that the entire bond proposal could be nixed, sources said.
After a number of ex-RBI governors flagged off the risks associated with the proposed bond issue and that India does not need foreign capital through bonds , the government has decided to review its decision of raising money through such bonds. The government held a meeting with Hindu nationalist group Rashtriya Swayamsevak Sangh (RSS), Swadeshi Jagran Manch (SJM) and top economists earlier this week , sources said.
The RSS and SJM officials, some economists and government representatives held a meeting on Tuesday and decided that the bond issues can not be actively pursued. This meeting, the sources said, apparently sealed the fate of Garg in his continuation in the finance ministry.
Garg was shifted to the Power Ministry after the cabinet committee on appointment held a meeting over a host of top IAS reshuffle chaired by the Prime MInister.
RSS, SJM and the economists have maintained that the move over the bind issue was taken without consultation, but they did not detail how the plan made its way into the Budget announcements.
Garg, however, has sought to counter the speculation. In a press conference on Friday after taking charge as power secretary, he said no one opposed the proposal on sovereign bond till the time he was in the Finance Ministry.
“The decision on sovereign bonds was taken to ease pressure on domestic availability of resources, especially for the private sector. It was a very considered decision where benefits are enormous and risks are a lot less. Until I was there (in the Finance Ministry), I had not heard anyone in the government questioning the move,” Garg told media persons.
Ashwani Mahajan, National Co-Convener of SJM, was on Wednesday contacted by IANS, but he did not speak on the meeting, but stressed his position against issuing foreign currency bonds.
In an interaction with IANS, Mahajan said: “95% of the experts say the move is risky. The average depreciation in the rupee is 6.23% in the last few years. The overseas rates of interest is 3.25 per cent, so, together they make 9.5%. In India, the government borrows at 6-7%. So how are the foreign currency bonds cheap? The whole idea of a soverign bonds is a bad idea for any other country, not just India. The overign borrowing has led many countries into the debt trap. Its a risk not worth taking. It is a foolish idea”.