Transfer of Rs 1.76 lakh crore by the Reserve Bank will help the Modi government boost the slowing economy.
The Modi government looking to kick-start the sagging economy will receive a major boost on Tuesday when the Reserve Bank of India transfers Rs 1.76 lakh crore of its surplus at one go as recommended by the Bimal Jalan committee. A senior RBI official said the amount will be credited to the Union government’s accounts, just a day after the RBI central board approved the Bimal Jalan panel’s recommendations.
“I think tomorrow (Tuesday) it should reflect in the government’s books,” the RBI official confirmed to Financial Express Online.
The Reserve Bank board had, on Monday, accepted the recommendation of the committee set up by it under the chairmanship of former RBI Governor Bimal Jalan.
Reserve Bank’s decision to transfer this huge amount in one go comes as a big relief for the Modi government that is desperately looking for funds to boost the slowing economy as Prime Minister Modi aims to make India a $5 trillion economy in the next five years. It requires a sustained GDP growth rate of over 9% for the next five years to achieve this target. India GDP of the Indian economy is $2.7 trillion at present.
A staggered payment by the RBI would not have provided the kind of headroom finance minister Nirmala
Sitharaman was looking to script an economic turn-around as GDP growth rate hit a five year low of 5.8% in the fourth quarter of FY 2018-19, lowest in the last five years.
Recent reports of a slowdown in automobile, FMCG and real estate sectors coupled with the unprecedented crisis in India’s shadow banking industry forced the government to announce a stimulus package within two months of presentation of the first budget of PM Modi’s second term. This record transfer of Rs 1.76 lakh crore from the RBI in one go will help the government to increase investment without breaching the fiscal deficit target.
“You know, there is no timeline (to complete the transfer) as it is one-time transfer,” said the official adding that process only involves updating the entries in relevant records.
In November last year, the Reserve Bank of India constituted an expert panel under the chairmanship of former RBI governor Bimal Jalan to decide the tricky issue of transfer of the RBI’s surplus fund to the Union government.
Jalan panel was formed following the premature departure of then RBI governor Urjit Patel last year who was at odds with the government’s proposal to transfer get a substantial amount of the bank’s surplus funds to contain its fiscal deficit.