FM Sitharaman hits back at Rahul Gandhi on RBI decision to transfer Rs. 1.76 lakh crore
NEW DELHI : Tackling criticism of the Reserve Bank of India’s decision to transfer a record Rs. 1.76 lakh crore from its surplus and reserves to the government, Finance Minister Nirmala Sitharaman today described as “outlandish” any questions raised on the credibility of the committee that recommended it.
“This committee (Bimal Jalan Committee) is appointed by RBI, it had eminent experts in it, they gave a formula based on which the amount was arrived at, now any suggestions about credibility of RBI, therefore, for me seems a bit outlandish, considering the committee was appointed by the Reserve Bank themselves,” Ms Sitharaman told reporters in Pune.
The time to debate whether the government did the right thing in coaxing the Reserve Bank of India (RBI) to transfer much more money than even what it had itself budgeted for is now past. Former RBI governors and other experts had warned it against raiding the RBI chest but the deed is done.
Now what needs to be seen is whether the bonanza is pumped into the economy as fiscal stimulus or whether the government tries to use it to keep a tight leash on its fiscal deficit, since its own revenue projections for 2019-20 have been falling short of target.
India’s economy is in the throes of a slowdown, with consumption falling across rural as well as urban markets, exports in trouble and industrial production slowing down. Gross Domestic Product (GDP) growth for the first quarter of this fiscal (April-June 2019) is believed to have fallen further from the 5.8%, 20-quarter low figure seen in the immediately previous quarter.
The government was widely expected to announce a fiscal stimulus worth lakhs of crores of additional expenditure over the weekend to kick-start economic growth. But finance minister Nirmala Sitharaman instead came up with a string of revival measures, which are welcome, that involve little extra government spending.
Will the RBI largesse push the government to actually hike public spending or announce further measures to boost growth? This remains to be seen. According to Economic affairs secretary Atanu Chakraborty the RBI surplus will “flow into the Consolidated Fund of India. Surplus to be spent as per budgetary process on capex, revenue expenditure”.So dare we hope that instead of dressing up fiscal deficit, the money will be pumped into capital expenditure?As per an RBI statement, the central bank will transfer Rs 1,76,051 crore to the government.
The breakup is like this: Rs 1,23,414 crore of surplus for the year 2018-19 and Rs 52,637 crore of excess provisions identified as per the revised Economic Capital Framework adopted by the RBI.
Since the government had budgeted for transfer of just about Rs 90,000 crore from the RBI for FY19, the actual bonanza is far beyond its own calculations. Analysts are uncertain over whether the much needed cash, which the government is slated to get, will all come to the starved capital investment space. Ratings agency CARE Ratings said in a note on Tuesday that as there would be a surplus of about Rs 86,000 crore,
The Budgetary targets are met in the normal course of activity. In this situation, the government will have this additional amount to spend as a stimulus and may be part of the future announcements to be made by the FM.
She was responding to a question on whether RBI’s international credibility AAA rating could be affected as it has reduced its surplus by transferring the amount to the government. The transfer, including a surplus of Rs. 1.23 lakh crore for 2018-19, will boost the government’s finances at a time it strives to tackle a nearly five-year low economic growth with lakhs of estimated job cuts across sectors, and defend its ambitious target of containing fiscal deficit at 3.3 per cent of the GDP.
The transfer of surplus and excess dividend is in line with the recommendations of the Bimal Jalan Committee, which was tasked to review the Economic Capital Framework of the RBI. Addressing concerns raised on the autonomy of Reserve Bank after its decision to transfer the huge amount to the government, Ms Sitharaman said, “Bimal Jalan committee had eminent experts in it, was constituted by Reserve Bank itself and not by the government.”
Among those who have slammed the move is Congress leader Rahul Gandhi, who said in a tweet: “PM and FM are clueless about how to solve their self-created economic disaster. Stealing from RBI won’t work – it’s like stealing a Band-Aid from the dispensary & sticking it on a gunshot wound. #RBILooted.”
Ms Sitharaman derided the comments. “Whenever Rahul Gandhi raises things like ”chor, chori,” one thing comes to my mind. He tried his best ”chor, chor, chori” but the public has given him a befitting reply. What is the point of using the same words again,” she said, apparently referring to his attacks on Prime Minister Narendra Modi during the elections in connection with the Rafale fighter jet deal.(With Agency Inputs ).
