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Chief Economic Adviser K V Subramanian said Tuesday the government will take into account all risks associated with the issuance of sovereign bonds in overseas markets. Finance Minister Nirmala Sitharaman in the Budget for 2019-20 announced that the government would start raising a part of its gross borrowing programme from external markets in foreign currencies. India's sovereign external debt-to-GDP level is among the lowest globally at less than 5 per cent, she added.
"We have outlined the thought behind it (sovereign bond issue) and we are very much cognizant of what we need to navigate carefully. We will factor in (all the risks and benefits) into the discussion," Subramanian said on the sidelines of an event here. There is a need to manage the risks associated with overseas sovereign borrowings, he said. The government is aiming to issue sovereign bonds in the second half of the current fiscal. Overseas borrowing will be part of the overall borrowing programme of the government. The government will borrow Rs 4.48 lakh crore from the market in 2019-20, higher than the Rs 4.22 lakh crore in the previous year to meet the fiscal deficit. The gross borrowing for the current financial year has been raised to Rs 7.1 lakh crore from Rs 5.71 lakh crore in 2018-19. The central government has decided to make gross borrowing of Rs 4.42 lakh crore in the first half of the 2019-20. Net borrowing in the first half (April-September) would be Rs 3.40 lakh crore. Speaking on the concerns of the foreign portfolio investors on the increased surcharge on income tax, he said, "Stock markets often take some time to see some of the bigger messages. I would urge the market participants to look thorough long- term impacts and factor that in." In the Budget 2019-20 tabled in Parliament last week, Sitharaman proposed to increase surcharge from 15 per cent to 25 per cent on taxable income between Rs 2 crore and Rs 5 crore, and from 15 per cent to 37 per cent for income above Rs 5 crore. The effective income tax rate for individuals with a taxable income of Rs 2-5 crore will go up from 35.88 per cent to 39 per cent, and for those above Rs 5 crore, it would go up to 42.7 per cent.