Sovereign Bonds Are Difficult And Risky, That’s Why We Should Do ThemBloombergQuintOpinion
If Alan Greenspan’s America suffered from irrational exuberance, economic nationalists’ India is seized by irrational fears. It became oh so painfully evident when the mint fresh idea of issuing $10 billion of overseas bonds—a cautious tenth of the government’s gross borrowing programme and less than three percent of foreign exchange reserves—got converted into a national trauma in less than three weeks.
I had greeted Finance Minister Nirmala Sitharaman’s announcement with these words of joy on July 6, 2019, a day after her maiden budget.
Please read between the lines of what I had written. It wasn’t an unqualified endorsement. I had underlined the difficulties – i.e., acquiring complex hedging and treasury management skills in volatile forex markets. And I had called it risky during times of capital flight. And yet, because it was difficult and risky, I had called it entrepreneurial, pregnant with exciting possibilities and gains.
After all, wasn’t it difficult and risky to fly across Pakistan and launch Israeli bombs at Balakot? Wasn’t it difficult and risky when Chandrayaan-2 was launched just a week after it was aborted? Or when, on Sep. 6, Vikram will have to soft land on Moon’s uncharted South Pole? Or when President Donald Trump had to be called a ‘liar’ in diplomatic language?
You get the point, right? Taking difficult risks is endemic to governing a strong-yet-weak, rich-yet-impoverished, united-yet-fractious country like India, which is also vulnerable to border hostilities. But as recent history has shown in all these situations, difficult risks have translated into enormous gains: against terrorists, in space, with America.
So why shy away from difficult and risky economic policies that are consciously kept within safe boundaries? Why not strive for massive gains in the economy too? Why capitulate to fear in the economic domain, when we had the gumption to surgically strike deep inside enemy territory?
Naysayers Vs Adventurers
But all such pleas fell on deaf ears. As always, the naysayers began to volubly neutralise the adventurers. And this time, the naysayers’ tent is brimming with contradictory ideologies:
You have to rub your eyes to believe that über liberals, committed centrists, and ultra-right-wingers have aligned their otherwise colliding convictions to trash sovereign bonds. If you carefully read all their objections, they are saying that managing sovereign bonds is difficult and risky. I agree.
But their prescription, of killing this bold idea, is based on the flawed presumption that sovereign bonds are bad and harmful. Pray, why has ‘difficult’ been conflated with ‘bad’, and ‘risky’ with ‘harmful’? I fully disagree with such an equivalence. It is apparent that they are not quite getting it!
So, Let’s Examine Each Objection One-By-One
So my dear Indians, yes, sovereign bonds are difficult and risky, but also hugely accretive; and that’s precisely why we must have the nerve to go ahead and launch them on a leash.
Raghav Bahl is the co-founder and chairman of Quintillion Media, including BloombergQuint. He is the author of two books, viz ‘Superpower?: The Amazing Race Between China’s Hare and India’s Tortoise’, and ‘Super Economies: America, India, China & The Future Of The World’.