Lok Sabha Election 2024: Former RBI deputy governor Viral Acharya recently spoke about a 2018 rift between the Narendra Modi government and the central bank. In a new prelude to his book ‘Quest for Restoring Financial Stability in India’, Acharya said that the central bank had put its foot down to the proposal of the government to ‘extract’ Rs 2-3 lakh crore from RBI’s balance sheet back in 2018.
The government wanted the money for pre-poll expenditure before the 2019 Lok Sabha polls, Acharya said in the new prelude. The startling revelations were first reported by ‘Mint’ on Tuesday. The report said that the new prelude is part of the updated edition of Acharya’s book, which was first published in 2020. According to the ‘Mint’ report, the prelude comes at a time when there has been lot of buzz around demand for more spending by the Centre during the Assembly and the Lok Sabha Elections 2024 despite nominal increase in the tax collections registered this year. While the General Elections are due next year, five major states will hold Assembly Elections by the end of this year.
While the prelude is new, the rift is something that Acharya has spoken earlier also. Back in 2018, Acharya had spoken about the rift during his address at AD Shroff Memorial Lecture. In his 2023 prelude, Acharya said that ‘creative minds’ in the government and the bureaucracy engineered a plan to extract a massive chunk of funds that was accumulated by the central bank. This fund was accumulated during terms of earlier governments and the plan was to transfer this sum to the current (2018) government.
During the demonetisation year, RBI’s profit transfers to the government reduced significantly due to the cost of printing new currency notes. This led the Centre to exert pressure on the RBI for extraction of funds ahead of 2019 polls, the Mint report said. After consistent refusal by the RBI, the Centre had invoked Section 7 of the RBI Act. For the first time in the history of RBI, this section was invoked. Then RBI Governor Urjit Patel had quit before the completion of his term. Though he had cited personal reasons, several media reports had said that increased attacks on the autonomy of RBI was behind Patel’s decision.
Viral Acharya had resigned from the central bank in 2019 six months before completion of his tenure. In 2018, Acharya had said that any attack on autonomy of RBI would be disastrous. “Governments that do not respect central bank independence will sooner or later incur the wrath of financial markets, ignite economic fire, and come to rue the day they undermined an important regulatory institution,” Acharya had said.