Public Debt Management: Reflections on Strategy and Structure
This chapter delves into the historical background in which debt management was undertaken by the RBI and emphasizes that the RBI has been successful in meeting the objectives of debt management. The process of managing public debt is a challenge with implications for financial stability in the short to medium term, and inter-generational equity in the long run. There could be possibility of conflict of interest between different roles of the Government. At the same time, involvement of the central bank in managing volatility and expectations due to large government borrowings makes central bank’s hands-on involvement necessary. This paper elucidates the challenges and presents arguments for not separating debt management from the RBI.