‘Crypto assets framework only after global consensus’

India’s long-awaited framework on crypto assets will be issued only after a global consensus is reached on such virtual assets, said Ajay Seth, economic affairs secretary. In an interview, Seth said the government will discuss sharing of information on crypto transactions and the origin of such transactions, among other issues, at the G20 meetings in an effort to bring consensus among member nations. Edited excerpts:

With the glide path on fiscal deficit being reiterated in the budget, will the government amend the FRBM Act to give legal sanctity to cut deficit levels?

We already have a goal post and a path on how the fiscal deficit should move. When we reach there in FY26, the question will arise, what thereafter. We already have a guidance for next three financial years and further action would follow thereafter.

Why has the budget not done enough for export promotion like last year, although exports have weakened?

With respect to exports, there is a broad set of opinion that the global economy is going to have a very significant slowdown in the next financial year, which is likely to have impact on our exports of both goods and services. Now, in order to counter that component of the economy that will not be growing as fast as we would like it to grow, we have to make sure that the rest of the economy grows faster. With significant investment going into infrastructure, more jobs would be created and infrastructure constraints would be removed and this will have a multiplier effect on the economy. So, the rest of the economy should grow faster and that’s really the effort.

Do you think the borrowing target of over ₹15 trillion for FY24 will be challenging? Are we also looking to reduce the overall debt?

If we see what our debt level was in FY21, the first year of covid, the government had to borrow significantly because revenues had come down and the economy contracted in that particular year. The government’s debt had become around 60% of the GDP; now it is back to around 57% and in a similar manner, the overall public debt was close to 90%. Now, it is around mid-80s. This will be a medium term...this will come down and we are seeing it every year. As far as next financial year is concerned, the more relevant part is the net borrowing of about ₹11 trillion of dated security. And that is at the same level that the government borrowed or will borrow in the current year. Next year, the economy will be 10.5% larger than today. So, to borrow around the same level as last year should not be an issue.

Is the 10.5% nominal growth target for FY24 a conservative estimate? Is it that we are estimating inflation to remain low in FY24?

The CPI is around 5.7% and WPI is also below 5%. We do see some moderation happening next year. As far as overall nominal growth rate of 10.5% is concerned, I feel it is conservative (estimate), but with an upside position.

What is the update on the framework for crypto assets?

We are working on evolving consensus among G-20 members on what should be the policy approach to crypto assets and what set of regulations will be appropriate. The goal is to build consensus first among the G-20 members and thereafter build upon that to have a wider consensus among other countries. We are working on having a consensus on regulations during India’s presidency of G-20 this year. Technology-driven crypto assets can be transacted over the internet, so it is not possible for a single government to regulate it. No country alone can handle this asset so building consensus is important.

Will the Indian framework on crypto come before the global consensus?

Yes. Not that till then there will be no regulation at all. For example, through the taxation route, like the issues around PMLA, who is buying, who is selling, those details being available. It is not that there would be a free play.

Derivative trading is proposed in IFSC in the budget. How do you think this will proceed and by when can this be started?

IFSC would be developing regulations before derivative trading including P-note issuance starts by entities. The concerns are well known so regulations will factor in the concerns. At the moment registration of P-note participants happens.

But for somebody to register as a P-Note, is not allowed in Indian markets. IFSC would start doing that in a prudent manner.

To facilitate derivative trading, government will first need to amend the Act before a draft regulation is issued by IFSC and thereafter regulations will be finalized before permissions are granted to identified entities for derivative trading.

Although the urban employment rate has declined, tech companies are resorting to huge layoffs. Does it concern you?

When we talk about employment, it is not just white collar employment that technology companies provide. Different sectors depending upon what their exposure to global markets have their own set of cycles and some of the advanced economies, which are highly dependent on technology are having a slowdown and this has an impact on the technology companies. But the Indian market is so large. Even for the IT industry, there is a huge Indian market available. What we are seeing, when the going is tough, everybody tries to economize. I see it as a short-term phenomenon rather than a long-term one.

What is the plan for sovereign green bond for FY24?

Green bonds is not off the table. Now we have the building blocks, necessary conditions so prerequisites have been taken care of. We have got an external evaluation of green bonds. One trache has already been done on 25 January and another is planned for the next week. So, the money we are going to raise this year, we will utilize that money next fiscal before we go the market for the next round of bonds tranche. When we raise money through the green bonds, the commitment is that it is used only for green projects. The decision to go or not to go for green bonds next year and the amount to be raised through it will be decided when we decide the borrowing calendar for the second half of FY24, sometime in September.