‘Desperate Move’: Mohan Guruswamy Rails Against Modi Govt For Seeking Rs 3.6 Lakh Crore RBI Surplus

Economist Mohan Guruswamy criticised the Bharatiya Janata Party (BJP) government’s proposal to have the Reserve Bank of India’s surplus of Rs 3.6 lakh crores transferred to itself. In a recent interview, he also said that the RBI was reluctant to accede to the government’s demand as it needed the funds to rescue the economy should the situation worsen.

Guruswamy told Caravan magazine that this seemed like an act of desperation by a government that has been troubled by the dual failures: one, of the execution of the Goods and Services Tax (GST) and two, of the demonetisation drive. He said, “This is a desperate move because GST collections are slow. The increased growth that was anticipated did not happen. Then there is slowdown of demonetisation. At that time, they were saying that we will get Rs. three lakh crores, as [that black] money which will not be put back [into circulation]. But all Rs 19 lakh crores came back.”

The former advisor to the then-finance minister Yashwant Sinha in the National Democratic Alliance government in 1998 also cautioned that if this money were to be given to the government, it is likely it would never be returned. “The government wants the Rs three lakh crore somehow because (it) is not able to do anything — it is not able to reduce subsidies; it is not able to control its borrowing or reduce its interest; it is not able to raise taxes. If the RBI loses its reserve, it will never get it back. They have lost Rs three lakh crores in demonetisation. Now they want to waste the RBI’s Rs 3.6 lakh crores also. This is a terrible state of affairs,” he said.

Also Read: Rahul Gandhi: PM Needs Rs 3.6 lakh Crores From RBI to Fix ‘Mess’ His Economic Theories Created

Noting that Non-Performing Assets (NPAs) of troubled corporates would find themselves erased as the country inched towards the 2019 general elections, Guruswamy pointed out the, “The NBFC [non-banking financial companies] sector has lent money recklessly. They want to put the money in banks so their NPA [non-performing assets] accounts are all cleared.”

“They (the government) don’t want the RBI’s money for asset creation — they want it to retire debts of NPAs. People who have taken money from banks are not paying it back. So that’s why the banks are not looking good. The banks are required to crackdown on the fellows who are not returning the money. They want to prevent that.”

Meanwhile, on Friday, November 9, former finance minister P Chidambaram questioned the department of economic affairs’ secretary Subhash Chandra Garg’s statements. Garg had claimed that the government had not asked for the transfer of the RBI surplus; rather it was only looking out to “fix appropriate economic capital framework of the RBI.”

Chidambaram tweeted, “What is this jargon put out by the government about “fix the economic capital framework of the RBI?” He added, “You fix what is broke. Which part of RBI is broken that the government is anxious to fix?”

You fix what is broke. Which part of RBI is broken that the government is anxious to fix?

— P. Chidambaram (@PChidambaram_IN) November 9, 2018

Key numbers behind potential transfer of Rs 3.6 lakh crore RBI surplus

• Over one-third of the RBI’s surplus reserves of Rs 9.59 lakh crores
• At present, the NPAs are around Rs 11 lakh crores. The surplus transfer of Rs 3.6 lakh crores is sought to erase a portion of the accumulated NPAs
• The sum of Rs. 3.6 lakh crores can be converted to two per cent of India’s total Gross Domestic Product (source: The Quint)

Also Read: Modi Govt Trying to ‘Capture’ RBI, Move would be ‘Catastrophic’: P Chidambaram