Jaitley takes pause in setting up public debt management

New Delhi : The provisions on the creation of an independent Public Debt Management Agency (PDMA) for raising public debt have been left out of the Finance Bill 2015-16 taken up for consideration in the Lok Sabha on Thursday.

This was stated by Finance Minister Arun Jaitley while commending the bill for the consideration of the lower house and its passage.

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“We have decided to delete the PDMA provisions from the finance bill for this financial year,” Jaitley told the Lok Sabha.

As a corollary of the decision to create a PDMA announced in Budget 2015-16, the Reserve Bank of India (RBI) was given the task of targeting inflation under a monetary policy framework agreement, he added.

The PDMA’s purpose was to manage the public debt, cash and contingent liabilities of the central government.

The establishing of a debt management office to consolidate all debt management
functions in a single agency and bring in holistic management of the government’s domestic and external debt had the full support of the RBI, the finance minister said.

The RBI currently oversees public debt management.

Both Jaitley and the RBI have earlier denied any rift on the issue of creating a debt management agency equidistant from both the government and the central bank.

“We have been telling there are no differences. Where is the question of sorting out,” RBI Deputy Governor S.S. Mundra told reporters last month in Mumbai when asked if all the differences between the government and the RBI on setting up of a PDMA have been sorted out.

“There is no disconnect,” Jaitley has told reporters here after addressing the RBI’s board of directors last month.

RBI Governor Raghuram Rajan has advocated keeping the proposed public debt agency independent of the government as well as the RBI to ensure fiscal discipline.

“The PDMA as a professional organisation, independent of the central bank and government, is something that is desirable,” he told reporters here.

Rajan said: “Such an independent structure puts some discipline on the government debt process and also frees regulation of the need to create some sort of financial impression.”