New Delhi, January 13, 2019: Financial Accountability Network India (FAN India) condemns the government’s move to seek another round of funds from Reserve Bank of India (RBI). This comes in just months after the RBI approved Rs. 1.76 Lac Crore (including Rs. 52,637 Crore from its contingency fund) of its surplus to be transferred to the government. This time, it is expected that the government will push for Rs. 35000 to 45000 Crores. If RBI agrees to this, it will be the third consecutive year that the government is asking for RBI’s dividend. Let us not forget that the first demand for surplus resulted in a stand-off and the resignation of the then RBI governor Urjit Patel. But this time, given the Jalan Committee recommendations and that the government has its nominees in the board, it is expected that the transfer will be a smooth one and will be done after the Budget session.
RBI maintains a contingency fund by keeping a portion aside out of its profits. By digging into the reserve funds of RBI, the government is not only taking away the autonomy of RBI, it also affects the RBI’s ability to tackle the unforeseen events such as sovereign crisis, volatile exchange rate and the current crisis in banking sector. This gathers significance when the non-performing assets (NPAs) crisis could push banks to the brim sooner than later. It would also risk a large number of common people whose savings can go down with the banks.
This move comes just three months after the Finance Minister shrugged off a question about the fall in GDP, at a press meet in Chennai, claiming it is “normal in a growth cycle to have ups and downs”. But an official from the Finance Ministry reportedly said, that the government wants the RBI to consider this an “exceptional year” and hence oblige to the payout of its profits. Given the recession in the economy and predictions of it not picking up in the near future it is not unlikely that every other year will continue to be an “exceptional year”. Will this be a new trend of the government to take RBI’s funds for its incompetency? Will the Finance Ministry account for this money, when it has failed to do so for the previous transfer of funds from the RBI?
We agree with the government that it has indeed been an “Exceptional Year” with the GDP falling to a 4.5 percent, growth rate is expected to be at 5 percent which is the lowest since 2008-09, cutting down spending of government departments down to Rs. 2 Lac Crore, divestment of major PSUs, manufacturing sector expected to grow at 2 percent which is a drastic fall comparing last year’s 6.9 percent and the imminent shortfall in tax revenue. And yet, the government refuses to acknowledge that the economy is in a severe crisis. This government is a victim of its own lies. Instead of actually taking a hard look at the reality of the economy, it still wants to trumpet its empty promise of a $5 trillion economy and is desperately trying to maintain liquidity, by either selling institutions or by asking them to transfer funds.
Despite its best efforts at diverting the attention and out rightly lying to the people that all is well, the reality is that this government has colossally failed! Now, it is trying to make it an annual affair to dig into the RBI’s profits. But will this help? If the past is of any indication, it is a resounding NO! This is not going to help the economy or the government in the long run. From the very beginning this government has taken one wrong step after the other in the wrong direction. The first and the most deadly blow to the people and the economy has been the policy of demonetisation which has its impact even till today! GST is yet another example of this government’s failure. Whether it is the banking crisis or an economic slow-down, one can count on this government to come up with the most harmful policy changes which enhance the problems instead of resolving it. To control the NPA crisis caused by corporate loans defaults, instead of punishing wilful defaulters and changing the lending policies, the government has consistently written –off crores of public money! It is important to note that while the government is planning to ask for Rs 45000 Crore from RBI for upcoming year, it has written off Rs 216,509 Crores in 2018-19 alone! To boost the economy, the ministry has reduced the corporate tax and to ease business by slashing down environmental, social and labour regulations in the name of progress.
Financial Accountability Network India demand that the government must stop taking RBI’s fund which is for contingency purposes. Finance Ministry should focus on ways to increase the revenues instead of treating RBI as one of it’s another Public Sector Unit. It is high time that we hold this government accountable for the failing economy and for all its wrongful anti-people policies. Weeks to go for the budget to be presented, it is time for us to demand concrete and long term solutions that would help recover the economy. The government must take measures to increase the spending capacity of the people, focus on spending more on rural employment guarantee and other sectors which would generate more employment and at the same time improve quality of life such as health, sanitation and education.
Financial Accountability Network India (FAN India) is a collective of civil society organisations, trade unions, people’s movements and concerned citizens to raise the issues of accountability and transparency of the national financial institutions. It also looks critically at the economic and financial policies that have an impact on the people.
- Anil T Varghese, Delhi Forum, New Delhi
- Ashok Choudhary, All India Union of Forest Working People (AIUFWP)
- Ashok Shrimali, Mines, Minerals and People (mm&P)
- Benny Kuruvilla, Researcher, New Delhi
- Centre for Financial Accountability (CFA), New Delhi
- Devidas Tuljapurkar, Gen Secretary, Maharashtra State Bank Employees Federation; Joint Secretary, All India Bank Employees Association (AIBEA)
- Dr. Bharat Patel, Machimar Adhikar Sangharsh Sangathan (MASS), Gujarat
- Gautam Bandyopadhyay, Nadi Ghati Morcha
- Indian Social Action Forum (INSAF)
- Leo F. Saldanha, Environment Support Group, Bengaluru
- Madhya Pradesh Jan Sangharsh Samnvya
- Maduresh Kumar, NAPM
- Major Priyadarshi Chowdhury, SC (Retd), National Coordinator, All Investor Safety Organisation (AISO)
- Nityanand Jayaraman, Writer and Social Activist, Chennai
- Raj Kumar Sinha, Bargi Bandh Visthapit Avam Prabhavit Sangh, Madhya Pradesh
- Ram Wangkheirakpam, Indigenous Perspectives, Manipur
- Ravi Pragada, Samata
- Ravindranath, River Basin Friends, Assam
- Saroja, Consumer Action Group, Chennai
- Senthil Babu, French Institute, Pondicherry
- Shabnam Hashmi, ANHAD
- Shripad Dharmadhikary, Manthan Adhyayan Kendra, Pune
- Soumya Dutta, MAUSAM
- Thomas Franco, Advisor, All India Public Sector and Central Govt Officers Confederation
- Umesh Tiwari, Roko Toko Thoko Krantikari Morcha, Sidhi
- Vijayan M J, Research Collective, New Delhi
- Vijayawada Laxmi Thakur, Sajhi Pahal Chhattisgarh
- Vinay Baindur, Independent Researcher, Bangalore
- Working Group on International Financial Institutions (WGonIFIs)
- Financial Accountability Network India (FAN India)
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