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Aug 29th, 2019 7:58 pm | By | Category: SPECIAL NEWS COVERAGE

‘Das Capital’ is what the latest transfer of funds from RBI is called. As the Narendra Modi govt in the start of its second term stares at a fiscal crisis what really can the RBI Capital transfer do ? To begin with there has been an intense debate on whether the excess reserves of RBI roughly around Rs 4 lakh cr should be utilised by the govt for various developmental purposes. The past and present RBI Governors as also economists are divided on the issue of whether the reserves should be transferred and how much is enough. The jury has fallen on the transfer of reserves with a transfer of Rs 1.76 lakh cr. But those of who have cautioned against it talk from the present set of experiences and circumstances to prove their negation. Countries like Argentina have done such transfers and the economy continued to fail as has been cited. Now the point is are such reserves used judiciously by the govt ? For starters it is recapitalising the Public Sector Banks. Besides with the residual sum it can invest in infrastructure projects, two it could smoothen out the GST process by bringing in one rate and the loss can be offset with this residual money, three it can utlise the money for revenue expenditure to meet its own expenses as has been done in the past. Unfortunately the experience from Latin America has been very poor with govt often using the money in populist schemes and in meeting its own housekeeping expenditures. Basically deploying it in unproductive use.

Article by Bhagyashree Pande

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