Debt management is a common issue in USA and credit card debtors are often benefited with several programs, public or private to overcome the magnum credit cared debts. But this year’s Union Budget in India has opened avenues for debt management in this country also. This was perhaps the most noted feature of Union Budget 2011 in India. The announcement by Pranab Mukherjee, the finance minister of India, regarding the introduction of Public Debt Management Agency of India Bill was the most significant one. This bill will open the opportunity to build an independent office for debt management.

This is undoubtedly a development but there is a need to judge this development by analyzing its aspects. The new legislation should be judged in the terms of it scope and its functions. It needs to be clearly defined whether this debt management service will include only state loans and government debts only. If we look at this issue from a macro level the proposition of public debt involves debt from both the governments; state and central.

The next question arises from the area of its functions. The Debt Management Office that has been proposed recently needs to define whether it will offer management on cash or investment. Both the investment and cash management are interwoven. Furthermore, the position of cash and dependence of both central and state governments over RBI for advances or overdrafts is highly influenced by the intricacy of inter-governmental transactions and fiscal transfers. This is the reason that DMO or Debt Management Office should include both the management systems in it and that too in both the levels of government.

Finally, this new debt management system needs to define which type of debt it will handle. It should clearly state that whether only marketable debts are included for management or other government liabilities like PF or provident funds and small savings.

The creation for debt management in today’s financial scenario is essential and creation of DMO will help to distinguish between debt and monetary management. This will help to avoid the conflict between the rates of interest among the two.

The DMO is about to bring a substantial change in the financial position of Indian government. However, it is still open to many questions as of now.