What are Consol Bonds ? How they can Improve India’s Balance Sheet ? | UPSC

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EDITORIAL 71:“A war-like state and a bond to the rescue

It does not matter how slowly you go as long as you do not stop.– Confucius

Dear Aspirants
IASbhai Editorial Hunt is an initiative to dilute major Editorials of leading Newspapers in India which are most relevant to UPSC preparation –‘THE HINDU, LIVEMINT , INDIAN EXPRESS’ and help millions of readers who find difficulty in answer writing and making notes everyday. Here we choose two editorials on daily basis and analyse them with respect to UPSC MAINS 2020.

Rangarajan Mohan Kumaramangalam

Rangarajan Mohan Kumaramangalam is an Angel Investor and Working President of the Tamilnadu Congress Committee


A war-like state and a bond to the rescue


With the pandemic’s shadow over the economy, a Consol Bond issue is a more compelling solution for the government



What are Consol Bonds ? Discuss how these bonds can elevate India from the present crisis. -(GS 3)


You will learn what are Consol Bonds .

  • How they are used to raise the money ?
  • How can they reduce the current fiscal deficit  ?


Several economists, former Finance Ministers and central bank Governors have made the clarion call for a large stimulus to pull the economy back from the brink.
  • There are a few who seem to believe that there are ways and means to provide this stimulus without breaking the bank as it were.
  • As we spend more time in a national lockdown or quasi-lockdown situation, I believe that austerity measures and reallocations notwithstanding, we will definitely need to go beyond current revenue receipts to fund the complete stimulus.



  • BALANCE SHEET :In the Budget before the pandemic, India projected a deficit of ₹7.96-lakh crore. However, even then there were concerns around off balance sheet borrowings of 1% of GDP and an overly excessive target of ₹2.1 lakh crore through disinvestments.
  • REVENUE SHRINKAGE : The financial deficit number is set to grow by a wide margin due to revenue shrinkage from the coming depression that will most certainly be accompanied by a lack of appetite for disinvestment.
  • In addition to the expenditure that was planned, the government has to spend anywhere between ₹5-lakh crore and ₹6-lakh crore as stimulus.
  •  States have already asked for double the limits due to the shortages in indirect taxation collections from Goods and Services Tax, fuel and liquor.


  • Politicians and epidemiologists across the world have used the word “war” to describe the situation the world is currently in.
  • As we wage a united war against this virus, it would be interesting for us to look at war-time methods of raising financing.


  • One such method that has been used as early as the First World War is the Consol Bond.
  • In 2014, the British government, a century after the start of the First World War, paid out 10% of the total outstanding Consol bond debt.
The bonds, which paid out an interest of 5%, were issued in 1917 as the government sought to raise more money to finance the ongoing cost of the First World War.
  • ADVERTISEMENT : Citizens were asked to invest with the advertising messaging: “If you cannot fight, you can help your country by investing all you can in 5 per cent Exchequer Bonds.
  • RISK ASSESSMENT : Unlike the soldier, the investor runs no risk.”
  • SMALL FUNDS : After all, most of the Consol bonds in the United Kingdom are owned by small investors, with over 70% holding less than £1,000.
Furthermore, unlike PM-CARES, the proceeds of the bonds could be used for everything — from Personal Protective Equipment for doctors to a stimulus for small and medium-sized enterprises.

      IASbhai Windup: 


  • There is no denying the fact that the traditional option of monetising the deficit by having the central bank buy government bonds is one worth pursuing.
With the fall of real estate and given the lack of safe havens outside of gold, the bond would offer a dual benefit as a risk free investment for retail investors.
  • When instrumented, it would be issued by the central government on a perpetual basis with a right to call it back when it seems fit.
  • An attractive coupon rate for the bond or tax rebates could also be an incentive for investors.
  • The government can consider a phased redemption of these bonds after the economy is put back on a path of high growth — a process that might take that much longer for every day we extend this lockdown.

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