Reserve Bank of India’s reserves to meet its
fiscal deficit target, finance minister
Arun Jaitley reiterated, replying to a parliamentary debate on the supplementary demand for grants.
He also said that the government will take all necessary measures to resolve the difficulties faced by farmers. Replying to accusations that the government was eyeing RBI’s reserves to meet fiscal deficit, Jaitley said the government had managed its math better than its predecessor.
“I don’t need RBI’s reserves for (meeting) fiscal deficit,” Jaitley said. He said three expert committees had been set up in the past – 1997, 2004 and 2013 – to decide on the RBI’s reserves. “Today, the question is how much economic framework capital the RBI needs,” he said pointing out that many central banks have pegged it at 8% of assets, while more conservative ones have it set at 14%, lower than that in India.
“Should it be at 27-28% in India,” he asked, adding that the expert committee set up under the leadership of former RBI governor Bimal Jalan will decide on the appropriate level. In case the current level is considered excessive, the surplus can be deployed elsewhere. “That money can be used for bank recapitalisation… for poverty alleviation,” he said.
He said the decision to set up the committee on the RBI’s economic capital framework as well as its composition had been made when Urjit Patel was still the governor. Patel resigned in December amid a row between the government and the RBI over various issues. The second batch of supplementary demands for grants for FY19 for gross additional expenditure of Rs 85,948.86 crore, which includes Rs 41,000 crore for capitalising public sector banks (PSBs), was later passed by voice vote in the Lok Sabha on Monday. With regard to concerns expressed by some members over agrarian distress, Jaitley said the government will take all steps to support farmers.
It had already raised the minimum support price (MSP), he pointed out. “Farmers’ difficulties be removed–whatever steps are needed, till the last step this government will do. This I would like to say clearly before this House,” Jaitley said.
The finance minister said the government had lowered the fiscal deficit and kept inflation and the current account deficit (CAD) under check, while retaining the fastest-growing economy tag for five years. Jaitley said it was only during the current government’s tenure that India had become the fastestgrowing major economy in the world, ahead of China. He said demonetisation and the goods and services tax (GST) had helped widen the tax base and allocate more funds for poverty alleviation and social sector programmes.
The number of income tax return filers has gone up from 38 million during the previous government to 68.6 million currently, he said. It could double by the end of the five-year term of the current government ending in May 2019. He said the government had enabled road and power connections to villages and 97% of houses now have toilets.
In the first 100 days of Ayushman Bharat universal health scheme, 700,000 people had availed of free treatment in hospitals, he said. By the second and third year, about 10 million poor will get treatment under the scheme. There is no bigger government-funded health scheme in the world, he said. He blamed indiscriminate lending by banks between 2008 and 2014 for the rise in the bad loans. The FM also dismissed the criticism over back-series of GDP.