The Apex Bank of India has decided to pay $ 24.8 billion as dividends and surplus capital to the Modi government.
|| Anjan K Samal
It is being claimed from various sources that this will help the Modi government in injecting boost to various public financial institutions which are in critical condition.
But with this, the concern is also being raised about the autonomy of the Reserve Bank of India. Last year, the then RBI governor Urjit Patel and the Modi government had disagreed at the policy level and Patel had resigned before the term was over which is well known to every country man.
Vivek Dahejia, Professor of Economics at Carlton University, Canada, told on the RBI’s decision , “The central bank is losing its executive autonomy and becoming a means to fulfill the greed of the government.”
The activities of RBI are monitored.
“It would undermine the credibility of the Reserve Bank,” Vivek Dahejia said. He further urged that nvestors who are looking towards India will raise their eye brow that RBI is completely under government control. I don’t think this is good for the economy. ”
In a statement issued on last Monday, the RBI informed that in the last financial year, total income of $ 17.3 billion and surplus amount of $ 7.4 billion is ready to be handed over to the government.
The Reserve Bank said that the transfer is under the New Economic Capital Framework, which has been accepted recently.
A committee was formed under the chairmanship of former RBI Governor Vimal Jalan and the same committee recommended the New Economic Framework. The recommendations of this committee have also been accepted by RBI.
RBI has agreed that it will give the entire income of the last financial year to the government. A dispute arose with the Reserve Bank in October last year about the use of safe money.
The then Deputy Governor of RBI, Viral Acharya, warned the government that if the government for it’s increased intervention at the policy level in the RBI, it would have very bad consequences. Viral Acharya had said that the government wants to get the safe money with RBI.
Only two months after this, Urjit Patel resigned from RBI. After this, the Modi government made Shaktikanta Das as the Governor.
It is interesting for the Indian Economy to know that on the day Shaktikanta Das became RBI governor, it was clear that the RBI has to act according to the wish of Union Government of India.
Many even don’t know that Shaktikanta Das has been an IAS officer and used to work as a spokesperson in the Ministry of Finance.When demonetization evolved,Das had also supported it instantly. Shaktikanta Das was studying history at St. Stephen’s College in Delhi. Mr. Das has worked as a government official. It is very important to have money with the Reserve Bank because if there is anything bad in the foreign market, the rupee will be weaker. Government figures are already doubtful.
This matter has also been raised by the former Economic Advisor of the Modi government.
The government is under pressure due to the weak economic process. The Indian currency rupee has crossed 72 against the US dollar. The pace of economic growth has not been accelerated for the fourth consecutive quarter. But the question still remains whether Modi will be able to strengthen the economy by taking money from RBI.
The government has even failed to achieve the target of tax collection.
The RBI pays dividends to the government of India every year based on its income from investment and printing of notes. For the last few years, the finance ministry was seeking a bigger payment from the RBI.
The Reserve Bank says that it has more money than needed, that is why the government has given such a huge amount. It is claimed that a situation of dispute between former RBI governor Urjit Patel and the government was based on this particular issue.
The Vimal Jalan committee had recommended that RBI should have 5.5 to 6.5 percent amount of its balance sheet. Earlier this amount was 6.8 percent. The government aims to reduce the 2020 budget deficit to 3.3% of GDP.
Viral Acharya came into the limelight as the deputy governor of RBI on October 26, 2018, when he heard the Modi government scandalously accusing the RBI of compromising autonomy. His speech took place exactly three days after the Reserve Bank board meeting.
In his nearly one-and-a-half-hour speech, he had categorically claimed that governments that do not respect the autonomy of the Apex bank and therefore has to face the rage of financial markets in a hurry.
That address by Acharya was seen as a ruckus in the relationship between the RBI and the Modi government.
When the government wanted a reduction in the interest rates, and was advocating for giving more cash to the non-banking finance companies, after which the NBA also wanted the RBI to give some part of its reserves to be handed over to government.