Government to decide on Subhash Chandra Garg’s successor, panel to meet again: Bimal Jalan

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Published: July 31, 2019 3:03:34 AM

FE had reported last week that although the Jalan panel’s report was being edited after recommendations were finalised in its last meeting on July 17, it might seek views of the finance ministry again.

Garg’s departure from the finance ministry seems to have necessitated another meeting of the panel.

Former Reserve Bank of India (RBI) governor Bimal Jalan, who is heading a committee to examine the central bank’s economic capital framework, said on Tuesday the government and the RBI will soon decide on the successor of former finance secretary Subhash Chandra Garg on the panel after his transfer to the power ministry. “We will most likely hold one more meeting before submitting the report with the RBI soon,” Jalan told FE. He, however, declined to comment on the findings of the panel.

FE had reported last week that although the Jalan panel’s report was being edited after recommendations were finalised in its last meeting on July 17, it might seek views of the finance ministry again.

“The panel may want to know if the finance ministry will still go ahead with the dissenting view of Garg or withdraw/dilute it. Jalan may try to forge consensus one last time by convening another meeting with the new economic affairs secretary,” a source had said. However, even if the finance ministry retains the dissent, it won’t bring in any material change to the panel’s recommendations, as Garg’s was a minority view, the source had added.

Garg’s departure from the finance ministry seems to have necessitated another meeting of the panel.

Stressing the economy’s resilience, Jalan said the current slowdown will be reversed in 1-2 years through “a judicious mix of right government policies and public-private partnerships”. “The economy is not facing a structural slowdown but a cyclical one, and it’s resilient enough. With suitable policies in the factors market (land, labour and capital), growth can be catapulted to a higher trajectory, despite external headwinds (like global trade war).”

Economic growth hit a five-year low of 6.8% in FY19. The RBI, the Economic Survey and the International Monetary Fund (IMF) have all forecast gross domestic product (GDP) to grow 7% in FY20. Earlier this month, the Survey suggested that India required to grow at 8% a year to meet the target of turning into a $5-trillion economy by FY25, and this pace of expansion can only be sustained by a “virtuous cycle” of savings, investment and exports that are catalysed and supported by a favourable demographic phase.

Garg, who was a member of the Jalan panel, had submitted dissenting views on its recommendations after it was clear that the review of the ECF would result in lower-than-expected transfer of the central bank’s surplus to the government. Before Garg’s exit, the panel was expected to submit its report by the first week of August. New economic affairs secretary Atanu Chakraborty will most likely replace Garg on the panel.

Sources had earlier said the Centre was unlikely gain a massive windfall in one go but could still reap rich financial dividends in the medium term, as the Jalan panel would recommend the transfer of the central bank’s excess reserves to the government over a period of 3-5 years. Garg had dissented, as he had reservations on the methodology endorsed by other members of the panel to arrive at the size of the RBI’s “surplus”, and also wanted the entire transfer in one go.

The latest FY20 Budget has pegged RBI’s dividend at Rs 90,000 crore, against Rs 68,000 crore last fiscal, even without factoring in the ECF review. So the surplus transfer could help the government tide over any potential shortfall in its tax revenue and contain fiscal deficit unless the panel ties the transfers to specific use like retiring public debt or recapitalisation of state-run banks.

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