India Official Overseeing Foreign Bond Sale Abruptly Replaced
Then Finance Secretary Subhash Chandra Garg and Chief Economic Adviser KV Subramanian attend the Finance Minister’s pre-budget consultation meetings, in New Delhi, on June 13, 2019. (Photograph: PTI)

India Official Overseeing Foreign Bond Sale Abruptly Replaced

(Bloomberg) -- Subhash Chandra Garg, a top finance ministry bureaucrat who was overseeing India’s plan to sell its maiden offshore sovereign bonds, is seeking early retirement after he was abruptly moved out of the role.

Garg, 58, was appointed as secretary of the Ministry of Power, according to a government statement late Wednesday. He was replaced by Atanu Chakraborty, an official who steered the nation’s asset-sale program, as the economic affairs secretary.

In a post via Twitter, Garg said he would take charge as power secretary on Friday and has applied for voluntary retirement from the service with effect from October 31.

While Garg’s new position carries the same pay and perks, the Finance Ministry role is widely considered superior.

The official’s departure may put at risk India’s move to raise as much as $10 billion selling India’s debut sovereign bonds overseas -- a plan that’s been opposed by Prime Minister Narendra Modi’s key ally and a group affiliated to ruling party’s ideological parent, the Rashtriya Swayamsevak Sangh. The government said the lower overseas borrowing costs would lower interest burden, an argument that’s been countered by former central bank governors.

Bonds Fall

Sovereign bonds fell after ET Now television reported that the office of Prime Minister Narendra Modi is opposed to selling debt in foreign currencies. The yield on the benchmark 10-year bonds rose 12 basis points to 6.55%, before closing at 6.51%.

“Such news doesn’t give you comfort, and that’s getting reflected in the market move,” said Anoop Verma, vice president for treasury at DCB Bank Ltd. “Traders will await any actual development on key policy issues.”

The bond sale could happen as early as October, and the nation could raise $10 billion in one go, people familiar with the matter said Wednesday.

“We should be in a position to design the bond issuance program in the next couple of weeks,” Garg had said earlier this month after Finance Minister Nirmala Sitharaman unveiled the bond sale plan in the annual budget July 5.

Public Taunt

Garg presided over a period of acrimonious relationship between the government and the central bank, caused by the Finance Ministry’s insistence that the Reserve Bank of India ease lending rules and hand over more of its excess capital. In October, Viral Acharya, then RBI deputy governor, publicly cautioned the government against undermining the institution’s autonomy, warning such actions may invite the wrath of the markets. Garg responded with a taunt via Twitter.

That followed a threat from the finance ministry to invoke a never-used provision of law to give directions to the RBI. The rift culminated in the resignation of Urjit Patel as governor in December, while Acharya stepped down this month ahead of his term.

Garg, who was a member on a panel studying the transfer of RBI’s excess reserves to the government, was the only dissenting member, people familiar with the matter said. The panel, headed by former RBI Governor Bimal Jalan, will soon submit its report.

Under Garg, the Finance Ministry also demanded that the capital markets regulator, Securities and Exchange Board of India, hand over its excess capital to the government. The regulator has written to Finance Minister Sitharaman, saying the move would hit its financial autonomy.

©2019 Bloomberg L.P.

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