Centre knows how to manage fiscal deficit
Of late, we have been reading many reports pointing fingers at the Centre with regards to the Reserve Bank of India The Narendra Modi government has...
Of late, we have been reading many reports pointing fingers at the Centre with regards to the Reserve Bank of India. The Narendra Modi government has the best track record than any other previous government in managing fiscal deficit. It does not need RBI reserves to manage the fiscal deficit. It is a priority of the government to maintain fiscal discipline. The Central banks of most of the countries keep a reserve of 8 per cent, while some conservative Central banks maintain 14 per cent reserves.
The RBI was maintaining a reserve of 28 per cent and the expert committee will decide on the appropriate reserve of the Central bank so that surplus funds could be utilised for funding poverty alleviation programmes and recapitalising the State-owned banks. The Reserve Bank has a massive Rs 9.59 lakh crore worth reserves and former RBI Governor-led Bimal Jalan headed six-member committee has been set up to decide on the optimum capital reserves that the Central bank should hold. The decision to set up the committee was taken when Urjit Patel was the Governor of the RBI.
Amid the economic capital framework becoming a flash- point between the RBI and the government, Patel resigned from the job on December 10, following which the government appointed former bureaucrat Shaktikanta Das as the new RBI governor. The RBI board is discussing on the Basel plus framework which the Central bank has stipulated for the banks to follow.
- Prerna Saxena, New Delhi