Former Chief Economic Advisor Arvind Subramanian on Saturday targeted the Modi government over its attempt to pressurize RBI into sharing its surplus.
Former Chief Economic Advisor Arvind Subramanian on Saturday targeted the Modi government over its attempt to pressurize RBI into sharing its surplus. Subramanian in an interview to NDTV said, "It (surplus funds) should not go towards routine financing of spending and deficit financing - that would amount to raiding the RBI."
Subramanian's comments came after a reported tussle erupted between the Centre and the Reserve Bank of India (RBI).
"RBI is one of India's most respected organisations... But I think the part of the problem has risen because the RBI has not been open to discussing it as a technical issue," he said to the TV channel.
"(Excess reserves) should be deployed but only for recapitalising for banks and only if that recapitalisation is done along with reforms of the banks," the former CEA added.
Earlier on Friday, the noted economist also shared his views over ongoing IL&FS crisis.
Arvind Subramanian called for an asset quality review (AQR) like the one carried out on the banks by the central bank, to fully gauge the extent of the hidden stress in the system. Stressing on the need for the Reserve Bank to function in an autonomous way, he also hit out at the recent "politicisation" of the issue, saying it is detrimental to the country's interests.
"I am proposing an AQR for non-bank lenders as well, as I think it's time we come clean on this problem," Subramanian said at the launch of his book 'Of Counsel: The Challenges of the Modi-Jailtely Economy' published by Penguin Random House India.
He wondered how the IL&FS issue, which involves Rs 95,000 crore in debt, could be hidden from the world that subsequently caused so much of pain in the system. In the book, he blames RBI for creating the IL&FS mess saying its regulatory failure has created the IL&FS monster and that RBI should be held responsible for the same.
Though RBI has a good reputation, it doesn't mean it's always right, as for years, RBI was unable to grasp the seriousness of loan repayment problems or identify prolonged frauds of Nirav Modi and the likes, he says in the book.
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 "Government attempts to pressurize RBI into sharing its surplus is equivalent to 'raid': Arvind Subramanian")
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