Nirmala Sitharaman announced the maiden issuance of FCSBs in her Budget speech on 5 July 2019. A storm broke out with RSS-related think tanks invoking the ghost of East India Company, as well as former RBI governor Raghuram Rajan accusing the government of selling out to foreign investment bankers.
Why did Sitharaman announce FCSBs?
I was aware of the Bharatiya Janata Party (BJP) politicians and RSS think tanks’ dislike of FCSBs—the bonds issued to foreigners, subscribed to by them in foreign currencies, primarily US dollars, and listed on foreign stock exchanges.
I explained to her the entire background of the past unsuccessful attempts of issuing FCSBs, and the political opposition to such bonds. At the same time, I highlighted the positives of such bonds and backed the CEA’s proposal as worth pursuing. Sitharaman, who had considerable reservations about me and my advice, approved the proposal, possibly because of her confidence in CEA Subramanian.
A para was duly included in the Budget speech, which was read out aloud in two meetings chaired by the PM, with Nripendra Misra and PK Mishra present. None objected. I looked around whether there were any unspoken reservations. I did not find any. It was clear that the proposal had the endorsement.
When Sitharaman read out the para as part of her Budget speech, I felt happy that FCSBs were finally making a debut. Subramanian claimed personal credit in his interaction at the Indian School of Business, Hyderabad a day later. In my interaction with business chambers, I announced that the government intended to raise FCSBs of about $10 billion in 2019-20 (about 10 percent of total borrowings).
The government, however, developed cold feet soon, with Subramanian also disowning it. In a meeting in PMO on 2 August 2019, in which I briefed the PM about my policy reform proposals to make India a $10 trillion economy, when I asked Subramanian why he changed his opinion, he had a sheepish grin.
The proposal lapsed after I left the Finance Ministry.
