The government is working on creating a "sovereign benchmark" for raising cheap debt from overseas markets, a top government official said on Tuesday. Principal Economic Advisor with the Finance Ministry, Sanjeev Sanyal said that as the primary deficit is low and the debt-GDP ratio was less than five per cent there is scope for raising low cost debt from overseas markets.

"The sovereign benchmark will be useful for raising borrowings abroad and it will be announced later in the year by the government", Mr Sanyal told reporters on the sidelines of annual general meeting of the Indian Chamber of Commerce here.

He said low cost borrowings from overseas market would largely reduce the crowding out effect in the domestic debt market and help maintain fiscal prudence.

According to Mr Sanyal, the government has been able to anchor the inflation level between three to four per cent and the target of real GDP growth of eight per cent is a "stiff and difficult target".

There is need to reduce the spread between lending and deposit rates, which is very high in India, he said. "There is no evidence that the interest rates are having any impact on the savings rates. This (reduction of interest rates) will help in lowering the cost of capital without affecting savings," Mr Sanyal said.

He said there is a serious problem in transmission of the interest rate cuts to consumers of the commercial banks byway of cheaper loans.

"The RBI needs to handle it", he said adding the enforcement of contracts is an important element for attracting foreign capital. "India's ranking in terms of enforcement of contract sis very low as 163. For this, there is a need to achieve efficiency of gains at lower, high and the Supreme court levels, he stated.

He said that the government is in the process of creating an inventory of land across the country. "The inventory will be used for monetisation and reduce the need for acquiring land for any project", he said. Regarding transfer of RBI's profits to government, Mr Sanyal said that this is "nothing new" and every central bank does it.