Change of label?

My View on  "Mint Road now closer to North Block": 

This comment is with reference to the portion “The ministry is also expecting a more cordial relationship with Rajan on other issues such as setting up of a Debt Management Office(DMO) in the ministry” in this story. 

If FM is able to exert sufficient pressure fast enough (let me be specific, before Rajan is able to comprehend the history and context of Public Debt Management in India), one will not be surprised to find the present team in RBI managing Public Debt getting GOI label and getting rechristened as DMO which is part of Finance Ministry. 

There is no irrationality in Government taking over and managing public debt on its own when the fiscal policy management has matured. The haste with which the finance ministry is trying to go through the process is unwarranted. Such a move at this juncture will destabilise one more arm of the government as the ministry is already burdened with several other preoccupations and compulsions arising from loss of credibility, compulsions of coalition politics and a host of other relationship issues with regulators and financial institutions including banks. 

RBI has been managing smoothly the public debt of central government under Section 21(2) and that of state governments by agreement as provided for under Section 21A of the RBI Act, 1934 for several decades. It is in the interest of country’s financial stability which is the basis for economic development, not to disturb the present arrangement at least until the government is in a position to take up the comprehensive review of the monetary system envisaged in the preamble of the RBI Act. The desperation with which FM pleads with PSUs for higher dividends to make up for the shortfalls in fiscal planning is any indication, one can imagine what can happen to government borrowing dependent only on the ‘ownership rights’ of a government which is pulled and pushed by weak coalition partners.

As government under the existing disposition has enough authority to ‘direct’ RBI in an eventuality, there is no need to hurry through the transfer of management of public debt from RBI to GOI at a time when more attention should be paid to clear the mess which is already there on the drawing board of finance ministry. 

- M G Warrier, Mumbai