RBI provides timely Relief for government

RBI opening coffers for government pulled the government from the economic mess


For almost the entire tenure of the government, there has been a tension over the economic instability the country is facing. The present government promised people of India development, more prosperity which previous governments have failed to deliver. This government is no exceptional mismanaged the economy with its expanded expenditure to win elections, without keeping an eye on how tax revenue was doing. It neglected ground economic reform, resulting in a slowdown in jobs being lost across the industries, stagnant wages, and rural distress. On the other hand, cheerfully spent lakhs of crores it received from low oil prices and higher oil taxes. The government has already squeezed the public sector of all that cash.  According to CONTROLLER GENERAL OF ACCOUNTS, there was Rs 1.7 lakh Crore shortfall, which was ignored in the budget. Thus RBI has been forced to open their coffers to rescue the government with exactly the same amount of 1.7 lakh crore, the “hole” in the government’s last union budget.

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Congress spokesperson Anand Sharma revealed to the reporters snatching RBI’s money is a catastrophic decision taken in sheer desperation and can push the country towards an economic emergency, which resulted due to the wrong budget. what government terms the money taken from RBI as Contingency Risk Buffer’ had to transferred in 4-5 years as suggested by Jalan Committee is transferred in one go, indicates the country’s economic and financial crisis. The Reserves which are like cushions and come in handy in times of instability have provided relief to the present government to streamline the current dwindling economy. The surplus from RBI will be used to stabilize Public sector banks (PSBs) which are under-capitalized with half a dozen weak banks under the prompt corrective action (PCA). This would also free them from any capital pressure in the next five years. Another sector is the development of finance institutions (DFI) could very well be utilized which can yield up to billions of dollars in the next decade. The government has to decide the proper vehicle to provide capital to infrastructure projects

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Similarly, there are government intermediaries like NHB, SIDBI, and NABARD, which can be well-stocked with capital to support the various neglected sectors of the economy. A part of the capital can be used to reduce large government borrowings. This will not only release more funds for the private sector but help in better transmission of interest rates.  The additional capital can be utilized to replace the sovereign bond issue to stabilize the current rupee depreciation in the external market.

The Article is written by Dr. Iram Rizvi who has a Ph.D. in Media and Journalism.

Opinions expressed in the article are of his personal and not of The Policy Times. For facts and credibility, viewers are requested to reach to the author.


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RBI provides timely Relief for government
RBI opening coffers for government pulled the government from the economic mess
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The Policy Times