Arun Jaitley says,’I don’t need a rupee from RBI surplus’

Mangalore Today News Network

New Delhi, Dec 19, 2018 : Union Finance Minister Arun Jaitley on Tuesday brushed aside the Opposition charge that the NDA government was in a friction-ridden relationship with the Reserve Bank of India that led to the resignation of governor Urjit Patel over the issue of cash reserve, Yahoonews reported.

 

At Agenda AajTak, Jaitley categorically stated that he does not want a "single rupee" from RBI’s surplus to fulfill his fiscal deficit goals or for any other expenses. "I do not want a single rupee [from the RBI’s surplus] for my fiscal deficit goals, or for this year’s expenses or for till the month of May. We will stick to our fiscal deficit targets," he said, dismissing charges that the Narendra Modi government was desperate to get part of the RBI’s reserve to fund major sops ahead of the 2019 polls.

In a recent interview to India Today TV, Jaitley had admitted that the government has invoked one element of Section 7 of the RBI Act to nudge the bank into commencing discussion on various issues flagged by it. On Tuesday, at Agenda AajTak, he reiterated that "a debate must be held on the issue of exactly how much money the RBI could hold in its reserves."

Flatly denying the charges that Urjit Patel had resigned from the position of RBI governor due to pressure from the government, Jaitley said, "A debate on the Economic Capital Framework is much needed. The framework would define how much money the RBI can have in its reserves and at what point it must hand over money to the government."

The Finance Minister reiterated that several experts, including former RBI Governor Raghuram Rajan (in his earlier avatar as the Chief Economic Advisor to the UPA government) and Modi government’s former Chief Economic Advisor Arvind Subramanian, had flagged the issue of reserves with a view to lay down with clarity how much is "adequate reserve" which the RBI should maintain. He added that there are countries in the world where central banks maintain 8% of its gross assets as reserves. Some conservative central banks have 13-14%. In 2013, UPA asked RBI to give Rs 1.46 lakh crore excess reserve. Then no one said that it is raiding the Reserve Bank, the minister quipped.

The Union government recently appointed former Department of Economic Affairs secretary Shaktikanta Das as the RBI governor. When asked if the government is not backing down on the issue of surplus reserve, Jaitley said, "So let there be some experts to discuss it... How is it that the idea that experts will discuss this is so unacceptable?"

RBI Guv’s resignation

To counter the Opposition’s charge that the resignation of Urjit Patel was an unprecedented event, the Finance Minister said, "Patel wasn’t the first RBI governor to have resigned. So did Sir Osborne Smith and S Jagannathan. So did Sir Benegal Rama Rau, whose second extended term, says the RBI, expired in 1957 ’due to differences with the finance minister’."

"In 1955, Jawaharlal Nehru wrote to Governor B Rama Rau that economic policy is to be framed by Government of India, monetary policy is to be framed by you, but your credit policies have to be in support of government’s economic policies. And if are suggesting you would resign ’I am unable to advise you to the contrary’. So he resigned. Jagannathan, as RBI Governor refused to give enhanced loans to Maruti. Indira Gandhi got him to resign," Jaitley said at the Aaj-Tak forum.

Liquidity scenario

Expressing concerns over the liquidity situation in the country, Jaitley said, "The crisis has a contagion effect. The government has to bring it to the notice of the Reserve Bank. The government would be failing in its duty if it does not use all instruments in its command to inform the central bank that this is a real problem which pinches and it would be completely incorrect for anybody to suggest that government flagging this issue is an infringement of autonomy."

When asked about the allegation that the Centre’s nominee to the RBI board, S Gurumurthy, was exerting pressure on Urjit Patel, the Union minister asked, "Why did no one say anything about a Rajya MP of the Congress Party deputed as a member of the RBI board during UPA rule?"

RaGa, Rafale & Mallya

Jaitley said, "He (Rahul Gandhi) lied on both the issues (Rafale and Vijay Mallya). Lie is short-lived and if you want to do serious politics it is important that you understand the seriousness of issues."

The Finance Minister rejected the demand for a Joint Parliamentary Committee probe into the Rafale deal.

He said, "We gave the price before Supreme Court and it said process has been followed. Supreme Court said offset was decided by Dassault. Let me tell you, parliamentary committees have a history of splitting on partisan lines, we have a majority there. But to conduct a farce which will only delay something which is inherently required in national security and after the court judgment there is no occasion for the matter to be called into or investigated."