Context: The Covid-19 pandemic and consequential national lockdown in the country has laid a grave impact on the Indian economy.As COVID-19 curve stretches further, there is a call for a large stimulus to pull the economy back from recession. Thus, an introduction of a Consol Bond is one of the solutions for the government to fund the stimulus.
Concerns

• India projected a deficit of Rs 7.96-lakh crore in the Budget before the pandemic.

Adding to the above concern: 

• Off-balance sheet borrowings of 1% of GDP. 
• The overly excessive target of Rs 2.1 lakh crore through disinvestments.
• Thus, financial deficit number is set to grow by a wide margin owing to corona crisis.
• There will be 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 between Rs 5-lakh crore and Rs 6-lakh crore as stimulus.
• The financial deficit number is set to grow by a wide margin due to revenue shortage caused due to lockdown
• There is lack of appetite for disinvestment.
• Even though RBI has increased the limit on ways and means for States by 60%, many of them have asked to double the limits. This is due to the shortages faced by States in indirect taxation collections from GST, fuel and liquor. 
• The government and the central bank need to understand that half measures will do more harm than good.

About Consol Bond

• It is a form of British government bond that has no maturity and that pays a fixed coupon.
• It is often considered a type of equity, rather than debt.
• The major benefit of these bonds is that they pay a steady stream of interest payments forever. However, these bonds can be redeemed at issuer's discretion.
• Consols are basically rare examples of actual perpetual bonds.
• The bonds were issued first time in 1917 as the government sought to raise more money to finance the ongoing cost of the First World War.

Why Consol Bonds is a good option for India?

• The introduction of the Consol bonds would have been a better solution for the government if people would have invested in consol bonds instead of making donations to PM-CARES. 
• It could have made citizens as active participants in handling the economic scenario of the country.
• Unlike PM-CARES, the proceeds of the bonds could have been used to fulfil the various essential medical as well as economic requirements of the country.
• 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.Citizens’ active participation is ensured in Consol Bond type alternative.
• Furthermore, 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.

About Perpetual Bonds

• A perpetual bond, also known as a “consol bond” or “prep,” is fixed income security with no maturity date.
• This type of bond is often considered a type of equity, rather than debt. One major drawback to these types of bonds is that they are not redeemable.
• However, the major benefit of them is that they pay a steady stream of interest payments forever.
• Perpetual bonds exist within a small niche of the bond market.
• This is mainly due to the fact that there are very few entities that are safe enough for investors to invest in a bond where the principal will never be repaid.
• AT-1 bonds which were recently in news due to YES bank failure is an example of a perpetual bond.