Ex Finance Secretary Subhash Chandra Garg Takes Sudden Exit

In yet another abrupt career ending by a senior bureaucrat former Finance Secretary Subhash Chandra Garg has decided to quite just after a day of his transfer to the Power Ministry. Mr. Garg has filed VRS. Being senior-most bureaucrat in the Finance Ministry, this abrupt career ending is getting considered as  sudden shocking news.

Garg’s sudden shifting, just after the Budget presentation and its approval by Parliament. Recently, Mr. Garg’s resistance to the proposed sovereign liabilities bonds is widespread.

Rathin Roy, member of the Economic Advisory Council to the Prime Minister, had recently said the government should not issue such bonds without getting into larger public consultations; also, he said government should pay attention to what several former Governors of the Reserve Bank of India are saying -- that sovereign liabilities are in perpetuity.

Roy also dismissed the contention that such bonds are cheaper after the hedging costs are added. Noting there was a reason why the country hadn't issued overseas debt for 70 years, he had said that Brazil, Argentina, Turkey, Greece, and Indonesia had all paid a price for foreign currency sovereign borrowings.

The departure of Garg has left the bond market uneasy, and understandably so. Garg’s departure in itself does not necessarily imply that the overseas sovereign bond project would be shelved, but the circumstances around his exit do raise doubts.

The fact that the proposal to issue overseas bonds has been announced in the Budget does not compel the government to see it through. The government can always cite the lack of a compelling need, and an uncertain global environment, for putting the plan on an indefinite hold.

The plot has thickened with the Prime Minister’s Office said to be favouring the issuance of rupee-denominated sovereign bonds overseas, instead of those denominated in foreign exchange.

An overseas bond issue in rupees would mean that the currency risk will be borne by the investors.