In an step towards better management of the government’s borrowings, the finance minister P Chidambaram announced that the Centre is ready with the Public Debt Management Agency Bill (PDMA) and that the proposed agency will be established as a non-statutory body and is expected to begin work in the next fiscal.
While the net borrowing for the government for the financial year FY15 is pegged at Rs 491,875 crore as against the revised estimates of 476,580 crore for FY14, the PDMA may get to do the job for the government during the next financial year.
“The government is ready with the Public Debt Management Agency Bill. Following the precedent, it is proposed to establish a non-statutory PDMA that can begin work in FY15,” said Chidambaram in his budget speech on Monday.
Economists have welcomed this development and say that RBI should move out of this. “It has been long awaited. Formation of PDMA with the task of borrowing for government moving out to them will also reduce the conflict of interest for the central bank that can focus more on the inflation management. It is part of the reform and RBI should move out of this,” said DK Joshi, chief economist, Crisil.
This came even though the RBI had in the past shown its reservation on taking away the borrowing task from them and had said that the lessons from global financial crisis indicate that institutional arrangements for government debt management in India over the medium term would require the continued involvement of the central bank coupled with more intensive co-ordination with the government.
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Former finance minister Pranab Mukherjee had first announced setting up of PDMA in his budget speech 2011-12 and now after a period of three years the government is ready with the bill to set up the body. The PDMA is expected to consist of RBI officials, civil servants and people from the private sector.