India Studies in Business and Economics Charan Singh Editor Public Debt Management Separation of Debt from Monetary Management in India India Studies in Business and Economics The Indian economy is considered to be one of the fastest growing economies of the world with India amongst the most important G-20 economies Ever since the Indian economy made its presence felt on the global platform, the research community is now even more interested in studying and analyzing what India has to offer This series aims to bring forth the latest studies and research about India from the areas of economics, business, and management science The titles featured in this series will present rigorous empirical research, often accompanied by policy recommendations, evoke and evaluate various aspects of the economy and the business and management landscape in India, with a special focus on India’s relationship with the world in terms of business and trade More information about this series at http://www.springer.com/series/11234 Charan Singh Editor Public Debt Management Separation of Debt from Monetary Management in India 123 Editor Charan Singh Indian Institute of Management Bangalore (IIMB) Bangalore, Karnataka India ISSN 2198-0012 ISSN 2198-0020 (electronic) India Studies in Business and Economics ISBN 978-81-322-3647-4 ISBN 978-81-322-3649-8 (eBook) DOI 10.1007/978-81-322-3649-8 Library of Congress Control Number: 2016947773 © Springer India 2016 This work is subject to copyright All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed The use of general descriptive names, registered names, trademarks, service marks, etc in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made Printed on acid-free paper This Springer imprint is published by Springer Nature The registered company is Springer (India) Pvt Ltd Preface Debt management in India has been a concern for more than five decades and the focus, since 1971 has been on domestic debt In view of the higher deficit in the last few years, stress on debt management has been high In a number of countries, because of the global financial crisis and rising debt ratios, debt management has assumed importance in recent years Debt management is a policy instrument used to minimize the cost of borrowings of the government over the medium-to-long term but considering the degree of risk It also creates a fiscal space for economic development and develops an effective domestic debt market Debt management impacts asset prices, interest payments, and interest rates in the economy Government’s debt management policy also impacts financial markets, and investment in the private sector can be crowded out Therefore, public debt management is crucial for the economy This book contains papers presented at the debt management module (DMM) under the aegis of Ninth Annual International Conference on Public Policy and Management organized by Centre for Public Policy at the Indian Institute of Management, Bangalore, in August 2014 DMM was planned to generate interest and exchange of ideas among international scholars, academia, and policy makers related to debt management practices DMM brought together experts in the field and led to a lively discussion of issues and future prospects related to public debt management I express my gratitude to all the participants for contributing to the discussions as chairs, discussants, and presenters I am thankful to Shri Harun Khan, Deputy Governor, RBI, for agreeing to give the keynote address at the conference and for his time and contribution I am thankful to contributors to this volume—Peeyush Srivastava, Vijay Singh Chauhan, and Ritvik Pandey who are policy makers for the government; K Kanagasabapathy, who was associated with debt management during his years at the Reserve Bank of India; Prof Ranjit Pattnaik from the academia; and Benno Ferrarini and Arief Ramayandi, experts from Asian Development Bank I am grateful to them for accepting the invitation to write papers on the subject and for taking time to travel to IIMB to attend the conference and engage in interesting discussions I appreciate their patience v vi Preface during the period of revisions of the papers This volume would not have succeeded without their cooperation and interest I particularly thank Dr G Ramesh, Chairman, Centre for Public Policy for encouraging the module on debt management I also thank the conference organizers for their proactive team effort in making the event a success I am thankful to Sharada Shimpi, Jafar Baig, Anand B., Namratha, Shara Bhattacharjee, and Gyanoba Rao for their assistance in organizing the module I am grateful to Ms Sagarika Ghosh and Ms Nupoor Singh for their support during the publication process Bengaluru, India Charan Singh Contents Introduction Charan Singh Public Debt Management: Reflections on Strategy and Structure Harun R Khan Debt Management of the Government Peeyush Srivastava 23 Cash and Debt Management in States Ritvik Pandey 41 India’s Experience with Cash Management Vijay Singh Chauhan 57 A Separate Debt Management Office Charan Singh 67 Financial Regulation and Independent Debt Management Office K Kanagasabapathy 93 Fiscal Responsibility and Budget Management Act: An Indian Perspective 105 R.K Pattnaik Public Debt Sustainability Assessments for Developing Asia 131 Benno Ferrarini and Arief Ramayandi 10 Round Table 193 Charan Singh vii Editor and Contributors About the Editor Charan Singh is RBI chair professor of economics at the Indian Institute of Management, Bangalore, India Earlier, he was a senior economist at the Independent Evaluation Office (IEO) of the International Monetary Fund (IMF), Washington, DC, from August 2009 to November 2012 He earned his doctorate in economics from the University of New South Wales, Sydney, Australia, and was a visiting scholar (postdoctorate studies) for more than a year each at Department of Economics, Harvard University, and the Stanford Center for International Development, Stanford University Dr Singh has worked extensively for more than two decades in the Reserve Bank of India where he joined as a research officer in 1984 His extensive career in the Reserve Bank included many assignments in operational and research departments and includes half a decade in debt management, in addition to fiscal policy management Prior to joining the Reserve Bank, Dr Singh worked, for a short period, as a management trainee in Punjab National Bank His current policy interests include fiscal policy and debt management, monetary policy, and international economics Contributors Vijay Singh Chauhan is serving as the commissioner of Customs, Mumbai He has worked in the Ministry of Finance in various capacities, including director, Budget Division E-mail: chauhan@nic.in Benno Ferrarini is a senior economist at Asian Development Bank He was formerly a senior research fellow with the World Trade Institute, Switzerland E-mail: bferrarini@adb.org ix x Editor and Contributors K Kanagasabapathy is an independent economic consultant based in Mumbai He was the former director of EPW Research Foundation and the former adviser in charge of Monetary Policy Department, Reserve Bank of India E-mail: kanakam@gmail.com Harun R Khan is the former Deputy Governor of Reserve Bank of India E-mail: hrkhan@rbi.org.in Arief Ramayandi is an economist at the Macroeconomics and Finance Research Division, Economics and Research Department, Asian Development Bank E-mail: aramyandi@adb.org Ritvik Pandey is an IAS officer of Karnataka Cadre He is currently serving as the commissioner of Commercial Taxes, Karnataka Government E-mail: ritvik@gov.in R.K Pattnaik is a professor at SP Jain Institute of Management and Research He retired as chief general manager (adviser), Reserve Bank of India E-mail: rk.pattnaik@spjimr.org Charan Singh is a RBI chair professor of economics at the Indian Institute of Management, Bangalore, India Earlier, he was a senior economist at IMF, Washington, DC, and director at RBI, Mumbai E-mail: charansigh@iimb.ernet.in Peeyush Srivastava is a senior IAS officer of Andhra Pradesh Cadre He is currently serving as director, Budget Division, Department of Economic Affairs, Ministry of Finance peeyush E-mail: srivastava@nic.in ... Developing Member Countries Debt Management Office Debt management strategy Debt sustainability analysis Debt- stabilizing primary balance Delivery-versus-payment Expenditure Management Commission Finance... Development Open-market operations Over the counter Primary dealers Public Debt Management Agency Public Debt Office Public Provident Fund Public sector enterprises Reserve Bank of India Revised estimates... of public debt management in India with the experts and enthusiasts gathered here Globally it is a well-recognized fact that countries need efficient and effective public debt management as public