Even as the Opposition continued raising issue related to autonomy of Reserve Bank of India (RBI), the Centre on Friday denied reports that it had ever asked the RBI to shell out Rs 3.6 lakh crore capital. After days of speculations, the Economic Affairs Secretary Subash Chandra Garg clarified that the government was only in discussion with the RBI top brass to fix appropriate economic capital framework of the central bank. "Lot of misinformed speculation is going around. The government's fiscal math is completely on track. There is no proposal to ask RBI to transfer Rs 3.6 or 1 lakh crore, as speculated," Garg tweeted.
Exuding confidence over the government's fiscal math, he said that it will stick to the fiscal deficit target of 3.3 per cent for the current financial year. "The government's FD (fiscal deficit) in FY 2013-14 was 5.1%. From 2014-15 onwards, Government has succeeded in bringing it down substantially. We will end the FY 2018-19 with FD of 3.3%. Government has actually foregone Rs 70,000 crore of budgeted market borrowing this year," he said.
The disagreements between the Bank regulator and the government came out in open recently, when RBI deputy governor Viral Acharya, said failure to defend the central bank's independence would "incur the wrath of the financial markets". Later it was revealed that government in an unprecedented step had invoked Section 7 of the RBI Act — to direct the Bank to ease NPA norms so that banks could start lending and support growth, and transfer more dividends to boost liquidity. The central bank opposed the move. All eyes are now on November 19 meeting of RBI's board, which is expected to discuss the issue threadbare.
Senior Congress leader and former finance minister P Chidambaram said the government is trying to capture the RBI to tide over its fiscal crisis. He warned that any such move would be catastrophic. "What is this jargon put out by the government about "fix the economic capital framework of the RBI?" Chidambaram tweeted. Economic capital framework refers to the funds set aside by the RBI required to deal with different kinds of financial risks such as an economic meltdown, he said. "You fix what is broke. Which part of RBI is broken that the government is anxious to fix?" he tweeted. Former finance minister said November 19 will be day of day of reckoning when the RBI board is scheduled to meet, adding that the government has packed the RBI board with its handpicked nominees and is making every attempt to ram through its proposal at the meeting. "If the RBI either defies the government or RBI governor resigns, in either events, the consequence will be catastrophic," he added.
Meanwhile, there were reports that just four hours before the announcement of demonetization by Prime Minister Narendra Modi, the central board of Reserve Bank of India had rejected the contention that the move will end black money and counterfeit notes. Quoting, minutes of the 561st RBI's central board meeting, which was called hurriedly around 5.30 pm on November 8, 2016, reports reveal that the move was described "commendable" but also warned that it would have a negative impact on the gross domestic product (GDP) of the current year, the report said.
As many as 99.3% of the old Rs 500 and 1,000 notes that were banned overnight in November 2016, were returned, the RBI had said in its latest annual report. Of the Rs 15.41 lakh crore worth of Rs 500 and Rs 1,000 notes in circulation before November 8, 2016, notes worth Rs 15.31 lakh crore were returned.
Money Matters
- The government’s FD (fiscal deficit) in FY 2013-14 was 5.1%. From 2014-15 onwards, Government has succeeded in bringing it down substantially
- The government has foregone Rs 70,000 crore of budgeted market borrowing this year (FY 2018-19)
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