Preparatory work for the inclusion of certain categories of government securities on global bond indices is almost over and some announcement on this plan is expected this fiscal, principal economic advisor Sanjeev Sanyal said on Friday. The government and the central bank are working closely to make it a reality, he said at a CII event.
Separately, speaking at the same event, Anand Mohan Bajaj, additional secretary in the department of economic affairs, said the government is working on establishing a ‘backstop facility’ to deepen the country’s corporate bond market. The plan was part of the latest Budget announcements.
“We are working on a very comprehensive facility. It will certainly instill confidence among the participants in the corporate bond market,” Bajaj said.
As for the G-sec listing on global indices, the government had not budgetted any amount to be raised through this route for this fiscal. However, any funds so raised was to proportionately reduce the government’s gross domestic market borrowing from the budgetted Rs 12 lakh crore.
The plan to Indian sovereign bonds in global bond indices is aimed at not just financing a portion of its elevated fiscal deficit in the aftermath of the Covid-19 outbreak but deepening the country’s bond market.
“If we are going to prepare for a period where liquidity is going to be slowly withdrawn globally, we want other sources of liquidity to open up for us. Obviously, it’s good for the general market. As the government is the biggest borrower in the system, obviously we are keen that there are tools of capital available that will continue to support our borrowing programmes,” the principal economic advisor said.
Any such move would potentially draw higher foreign flows, as many overseas funds track global indices.