Words coming back to bite.

"Th government has used financial innovation to recapitalise Punjab and Sind Bank by issuing the lender Rs 5,500 crore (Rs 55 billion) worth of non-interest bearing bonds valued at par." "Though these will earn no interest for the subscriber, market participants term it both a 'financial illusion' and 'great innovation' by the government where it is using Rs 100 to create an impact of Rs 200 in the economy." These bonds cannot be traded and will mature in 10-15 years. In 2007, one dollar bought Rs 40, today one dollar buys Rs 73. If these bonds cannot be traded they have no market value, they pay no interest and their value at maturity could be halved if the rupee falls in value, then how do they improve the credit rating of the bank? Mystery. The government maybe resorting to sleight of hand because it has to borrow Rs 12 trillion instead of a budget estimate of Rs 7.8 trillion in the financial year 2020-21, and last week, Cairn Energy announced that "it has won the arbitration against the Indian government over a tax dispute arising from demand of $1.2 billion from tax department on listing of Indian operations back in 2007". Now India has to pay $1.2 billion to Cairn along with interest. The three-member tribunal at the Permanent Court of Arbitration in The Hague, which "consisted of one member appointed by the Indian government", quoted the election manifesto of Prime Minister Narendra Modi's party BJP in the 2014 general election, former Finance Minister Arun Jaitley and Modi himself, who promised that the government "will not resort to retrospective taxation; we are making our tax regime transparent, stable and predictable". Earlier, Vodafone won its arbitration against a retrospective tax demand of $2 billion in the same court and the government was ordered to pay $5.47 million as compensation to cover Vodafone's legal costs. The government refuses to see sense. "India has challenged an international tribunal's verdict in favor of British telecom giant Vodafone Group in a case involving a Rs 20,000 crore demand from the Indian income tax authorities, in Singapore, government sources," even though our own Supreme Court found in favor of Vodafone way back in 2013 when the previous Congress-led UPA government was in power. "For the government, businesses using past bilateral investment protection agreements to seek damages for tax demands infringes on its sovereign right of taxation, can't be allowed to go uncontested," wrote Gireesh Chandra Prasad. The government cannot win. It can renegotiate all the past trade agreements which could result in a fall of investment by foreign companies and retaliatory measures by other countries. At the very least it should respect our Supreme Court judgement and stop wasting taxpayer money on lawyers. Who knew foreigners will use Modi's own words against the government? Words more dangerous than sticks and stones, it seems.