<a href="http://www.wionews.com/india-news/order-to-monitor-computers-exists-since-2009-arun-jaitley-185675">Finance Minister Arun Jaitley</a> Monday said the government was not seeking Reserve Bank surplus to meet fiscal deficit but to utilise them for accelerating poverty alleviation programmes and recapitalising the state-owned banks.

Replying to a debate on the second batch of supplementary demands for grants in the Lok Sabha, the Minister said that the Modi government has the best track record of keeping fiscal deficit under check.

The House later passed supplementary demand for grants for the current fiscal to provide additional expenditure of Rs 85,948.86 crore, about half of which is for capital infusion in public sector banks.

Referring to the issues concerning the Economic Capital Framework (ECF) of RBI, Jaitley said that central banks of most of the countries keep a reserve of 8 per cent, while some conservative central banks maintain 14 per cent reserves.

The RBI was maintaining a reserve of 28 per cent, he said, adding the expert committee will decide on the appropriate reserve of the central bank so that surplus funds could be utilised for funding poverty alleviation programmes and recapitalising the state-owned banks.

"This government has the best track record than any other previous government in managing fiscal deficit. We do not need RBI reserves to manage the fiscal deficit, Jaitley said.

He said the Modi government has brought down fiscal deficit and kept inflation and the Current Account Deficit (CAD) under check, while India retained the fastest growing economy tag for 5 years.

The Finance Minister further said that it was only during the Modi government tenure that India became the fastest growing major economy&nbsp; 
in the world, ahead of China.

Jaitley also said that demonetisation and the Goods and Services Tax (GST) has helped increase the tax base and allocate more funds for poverty alleviation and social sector programmes.

The number of Income Tax return filers have gone up from 3.8 crore during the UPA regime, to 6.86 crore currently.

When the NDA government completes its five-year term in 2019, the number would double from 3.83 crore, he added.

With regard to concerns expressed by some members over the agrarian situation, Jaitley said the government will take all steps to support the farmers.

"Whatever steps need to be taken at the end, the Government will take it," he said, amid sloganeering by Congress over the Rafale issue.

Finance Minister Arun Jaitley Monday said the government was not seeking Reserve Bank surplus to meet fiscal deficit but to utilise them for accelerating poverty alleviation programmes and recapitalising the state-owned banks.

Finance Minister Arun Jaitley Monday said the government was not seeking Reserve Bank surplus to meet fiscal deficit but to utilise them for accelerating poverty alleviation programmes and recapitalising the state-owned banks. Replying to a debate on the second batch of supplementary demands for grants in the Lok Sabha, the Minister said that the Modi government has the best track record of keeping fiscal deficit under check. The House later passed supplementary demand for grants for the current fiscal to provide additional expenditure of Rs 85,948.86 crore, about half of which is for capital infusion in public sector banks. Referring to the issues concerning the Economic Capital Framework (ECF) of RBI, Jaitley said that central banks of most of the countries keep a reserve of 8 per cent, while some conservative central banks maintain 14 per cent reserves. The RBI was maintaining a reserve of 28 per cent, he said, adding the expert committee will decide on the appropriate reserve of the central bank so that surplus funds could be utilised for funding poverty alleviation programmes and recapitalising the state-owned banks. "This government has the best track record than any other previous government in managing fiscal deficit. We do not need RBI reserves to manage the fiscal deficit, Jaitley said. He said the Modi government has brought down fiscal deficit and kept inflation and the Current Account Deficit (CAD) under check, while India retained the fastest growing economy tag for 5 years. The Finance Minister further said that it was only during the Modi government tenure that India became the fastest growing major economy in the world, ahead of China. Jaitley also said that demonetisation and the Goods and Services Tax (GST) has helped increase the tax base and allocate more funds for poverty alleviation and social sector programmes. The number of Income Tax return filers have gone up from 3.8 crore during the UPA regime, to 6.86 crore currently. When the NDA government completes its five-year term in 2019, the number would double from 3.83 crore, he added. With regard to concerns expressed by some members over the agrarian situation, Jaitley said the government will take all steps to support the farmers. "Whatever steps need to be taken at the end, the Government will take it," he said, amid sloganeering by Congress over the Rafale issue.

Government not seeking RBI reserves to meet fiscal deficit: Arun Jaitley

GDP numbers are misleading, RBI’s autonomy is in extreme danger and demonetisation is the biggest banking scam, former finance minister Yashwant Sinha claims in his new book. He also says that Prime Minister Narendra Modi’s idea of self-employment is a ‘distraction from the more serious issue of unemployment and underemployment’. 
 
Sinha, who has been quite vocal about the government’s policies since the past couple of years, quit the BJP in April. Party leaders have been dismissing his allegations on several issues with BJP chief Amit Shah once asking if people should believe the ministers or those ‘who did not get jobs’. 
 
According to Sinha, Modi blew a golden opportunity to send the economy soaring to new heights. 
 
“He could have fixed the UPA’s legacy issues and fundamentally raised India from a poor country to a middle-income country, but he squandered the chance,” he says, adding his book demonstrates how ‘Modi unmade India’. 
 
Though the book “India Unmade: How the Modi Government Broke the Economy” is a critique of the NDA government’s economic management, Sinha says he has not always been a critic of Modi. 
 
“Nor do I have a personal vendetta against him for not appointing me minister or giving me some other post, as some people incorrectly speculate. In fact, the truth is that I recognised his mettle early on and was one of the first senior Bharatiya Janata Party (BJP) leaders to say he should be made the party’s prime ministerial candidate in the 2014 elections,” he claims. 
 
He has been severely critical of Modi on demonetisation, jobs, GDP figures and Make in India among others policies and programmes. 
 
“The Modi government’s lasting legacy will be the catastrophe that was the demonetisation of high-denomination currency on November 8, 2016,” he argues. 
 
“Demonetisation was a whimsical decision that served no purpose of governance. It did, however, provide Modi with a populist campaign plank of having taken tough decisions to nab the corrupt rich. His decision paid a rich electoral dividend in Uttar Pradesh in 2017. But as far as the constantly shifting governance objectives of demonetisation went, it was a big zero,” he says. 
 
On the second anniversary of demonetisation, Finance Minister Arun Jaitley had said that demonetisation resulted in increasing the tax base and a higher tax collection (both direct and indirect) for the government, thereby improving its fiscal health. He had also clarified that the real purpose of demonetisation was not the confiscation of cash but to bring it to the formal economy and make the holders pay tax. 
 
On Make in India, Sinha writes, “The malaise of Indian industry during Modi’s tenure is typified by his most famous flagship scheme, Make in India. It is his biggest failure; it is also an unoriginal idea. It is nothing more than a revival of the National Manufacturing Competitiveness Council that the UPA set up in 2004, whose first chairman was V Krishnamurthy.” 
 
He also says that the growth rates were seemed to have been recalibrated to make the government’s economic management look good, with an average rate of 7.35 per cent over its first four years. 
 
The jobs Modi mentioned like ‘pakoda’ sellers, autorickshaw drivers, tea-stall boys and newspaper deliverers are all in the informal sector and are nobody’s idea of an aspirational job, he says. He terms GDP figures as way below India’s potential. “But then India is the only country in the world that grows at 7.35 per cent, without investment, without industrial growth, without agricultural growth. Just like magic,” he writes in a sarcastic vein. 
 
The GST concept, he says, is good because it is simple and will lead to lower prices because there won’t be any tax on tax; there’ll be tax set-offs at every stage, and it will widen the tax net for transactions. 
 
“It is a better tax, but Modi-Jaitley botched it up at its very beginning. That GST has been tweaked 200 times already and over 400 notifications and 100 circulars and FAQs have been issued since its launch is standing testimony to the folly of the Modi-Jaitley team.” 
 
Sinha says that UPA’s management of the economy was also flawed. 
 
“When the global financial crisis hit us, the (UPA) government decided to focus on increasing consumer demand, and it began reducing or even eliminating some excise duties. 
 
“This, along with the debt waiver and MNREGA, was meant to put money in people’s pockets to encourage consumption demand. Yet all these welfare measures hardly encouraged productive activity and did not increase investment,” he writes. 
 
The Modi government, according to him, had everything going for it on all fronts; it had the kind of opportunity few governments have had in independent India’s history, yet it squandered its mandate. 
 
“In summation, the Modi government is just about event management. He is the best in creating false impressions. In the process, Modi has given India its ‘lost half-decade’. Elect him again and by 2024 it will be a lost decade,” he warns. 
 
The book, published by Juggernaut, is co-authored by journalist Aditya Sinha.

So, why is the need for the book? “. Over the last fifty-five months, the Modi government has dished out a stunning continuum of untruths and boasts about its economic management, performance and accomplishments. It thus becomes essential to speak truth to power, and so it is my job that this book is a statement of fact.”Sinha.&nbsp;

GDP numbers are misleading, RBI’s autonomy is in extreme danger and demonetisation is the biggest banking scam, former finance minister Yashwant Sinha claims in his new book.

GDP numbers are misleading, RBI’s autonomy is in extreme danger and demonetisation is the biggest banking scam, former finance minister Yashwant Sinha claims in his new book. He also says that Prime Minister Narendra Modi’s idea of self-employment is a ‘distraction from the more serious issue of unemployment and underemployment’. Sinha, who has been quite vocal about the government’s policies since the past couple of years, quit the BJP in April. Party leaders have been dismissing his allegations on several issues with BJP chief Amit Shah once asking if people should believe the ministers or those ‘who did not get jobs’. According to Sinha, Modi blew a golden opportunity to send the economy soaring to new heights. “He could have fixed the UPA’s legacy issues and fundamentally raised India from a poor country to a middle-income country, but he squandered the chance,” he says, adding his book demonstrates how ‘Modi unmade India’. Though the book “India Unmade: How the Modi Government Broke the Economy” is a critique of the NDA government’s economic management, Sinha says he has not always been a critic of Modi. “Nor do I have a personal vendetta against him for not appointing me minister or giving me some other post, as some people incorrectly speculate. In fact, the truth is that I recognised his mettle early on and was one of the first senior Bharatiya Janata Party (BJP) leaders to say he should be made the party’s prime ministerial candidate in the 2014 elections,” he claims. He has been severely critical of Modi on demonetisation, jobs, GDP figures and Make in India among others policies and programmes. “The Modi government’s lasting legacy will be the catastrophe that was the demonetisation of high-denomination currency on November 8, 2016,” he argues. “Demonetisation was a whimsical decision that served no purpose of governance. It did, however, provide Modi with a populist campaign plank of having taken tough decisions to nab the corrupt rich. His decision paid a rich electoral dividend in Uttar Pradesh in 2017. But as far as the constantly shifting governance objectives of demonetisation went, it was a big zero,” he says. On the second anniversary of demonetisation, Finance Minister Arun Jaitley had said that demonetisation resulted in increasing the tax base and a higher tax collection (both direct and indirect) for the government, thereby improving its fiscal health. He had also clarified that the real purpose of demonetisation was not the confiscation of cash but to bring it to the formal economy and make the holders pay tax. On Make in India, Sinha writes, “The malaise of Indian industry during Modi’s tenure is typified by his most famous flagship scheme, Make in India. It is his biggest failure; it is also an unoriginal idea. It is nothing more than a revival of the National Manufacturing Competitiveness Council that the UPA set up in 2004, whose first chairman was V Krishnamurthy.” He also says that the growth rates were seemed to have been recalibrated to make the government’s economic management look good, with an average rate of 7.35 per cent over its first four years. The jobs Modi mentioned like ‘pakoda’ sellers, autorickshaw drivers, tea-stall boys and newspaper deliverers are all in the informal sector and are nobody’s idea of an aspirational job, he says. He terms GDP figures as way below India’s potential. “But then India is the only country in the world that grows at 7.35 per cent, without investment, without industrial growth, without agricultural growth. Just like magic,” he writes in a sarcastic vein. The GST concept, he says, is good because it is simple and will lead to lower prices because there won’t be any tax on tax; there’ll be tax set-offs at every stage, and it will widen the tax net for transactions. “It is a better tax, but Modi-Jaitley botched it up at its very beginning. That GST has been tweaked 200 times already and over 400 notifications and 100 circulars and FAQs have been issued since its launch is standing testimony to the folly of the Modi-Jaitley team.” Sinha says that UPA’s management of the economy was also flawed. “When the global financial crisis hit us, the (UPA) government decided to focus on increasing consumer demand, and it began reducing or even eliminating some excise duties. “This, along with the debt waiver and MNREGA, was meant to put money in people’s pockets to encourage consumption demand. Yet all these welfare measures hardly encouraged productive activity and did not increase investment,” he writes. The Modi government, according to him, had everything going for it on all fronts; it had the kind of opportunity few governments have had in independent India’s history, yet it squandered its mandate. “In summation, the Modi government is just about event management. He is the best in creating false impressions. In the process, Modi has given India its ‘lost half-decade’. Elect him again and by 2024 it will be a lost decade,” he warns. The book, published by Juggernaut, is co-authored by journalist Aditya Sinha. So, why is the need for the book? “. Over the last fifty-five months, the Modi government has dished out a stunning continuum of untruths and boasts about its economic management, performance and accomplishments. It thus becomes essential to speak truth to power, and so it is my job that this book is a statement of fact.”Sinha.

PM Modi could have fixed UPA’s legacy issues but he squandered the chance: Yashwant Sinha

Former Chief Economic Advisor (CEA) Arvind Subramanian opined that although the Reserve Bank of India's (RBI) independence is sacred, there must be "creative tension" between the central bank and government.

Subramanian, who participated in an interactive session with entrepreneur and co-founder of Infosys Nandan Nilekani, was of the view that anything that damages or undermines the RBI's reputation will cost the country dearly in the long run.

Also read: <a href="http://www.wionews.com/india-news/will-uphold-autonomy-of-rbi-new-governor-shaktikanta-das-183476">Will protect RBI's autonomy, says New Governor Shaktikanta Das</a>

"We want autonomy and independence but along with communication and cooperation because both parts of the government (i.e. RBI and government) have to work together as many of their objectives are common. There will be some objectives which are different and that's why we created RBI. They will never agree, they should never agree, there has to be a creative tension," he said.

Subramanian, however, noted that despite all shortcomings in the last 5-6 years, the RBI remains one of India's most respected institutions.

Acknowledging the connect between financial stability and robust functioning of the Reserve Bank, Subramanian, who is a visiting professor at Harvard University, said the RBI has to be accountable for glaring deficiencies and shortcomings in the financial system or economy.

"As long as autonomy (of RBI) is protected, there will be no issues," he asserted.

The recent rift between the RBI and the union government is one that has been widely debated, particularly after RBI Deputy Governor Viral Acharya stressed on the need to ensure the central bank's independence.

On Monday, Urjit Patel stepped down as the RBI Governor citing "personal reasons", weeks after differences between the central bank and the government regarding its "independence" became public.

A day later, former economic affairs secretary Shaktikanta Das was appointed as the new governor of the central bank with immediate effect.

Former Chief Economic Advisor (CEA) Arvind Subramanian opined that although the Reserve Bank of India's (RBI) independence is sacred, there must be "creative tension" between the central bank and government.

Former Chief Economic Advisor (CEA) Arvind Subramanian opined that although the Reserve Bank of India's (RBI) independence is sacred, there must be "creative tension" between the central bank and government. Subramanian, who participated in an interactive session with entrepreneur and co-founder of Infosys Nandan Nilekani, was of the view that anything that damages or undermines the RBI's reputation will cost the country dearly in the long run. Also read: Will protect RBI's autonomy, says New Governor Shaktikanta Das "We want autonomy and independence but along with communication and cooperation because both parts of the government (i.e. RBI and government) have to work together as many of their objectives are common. There will be some objectives which are different and that's why we created RBI. They will never agree, they should never agree, there has to be a creative tension," he said. Subramanian, however, noted that despite all shortcomings in the last 5-6 years, the RBI remains one of India's most respected institutions. Acknowledging the connect between financial stability and robust functioning of the Reserve Bank, Subramanian, who is a visiting professor at Harvard University, said the RBI has to be accountable for glaring deficiencies and shortcomings in the financial system or economy. "As long as autonomy (of RBI) is protected, there will be no issues," he asserted. The recent rift between the RBI and the union government is one that has been widely debated, particularly after RBI Deputy Governor Viral Acharya stressed on the need to ensure the central bank's independence. On Monday, Urjit Patel stepped down as the RBI Governor citing "personal reasons", weeks after differences between the central bank and the government regarding its "independence" became public. A day later, former economic affairs secretary Shaktikanta Das was appointed as the new governor of the central bank with immediate effect.

Creative tension should exist between RBI, Government: Former CEA Arvind Subramanian

Keeping up the heat on the RBI, the government will continue to press the central bank to relax norms to boost lending and transfer at least a third of its Rs 9.6 lakh crore reserve, sources familiar with the discussions said.

In recent weeks, the <a href="http://www.wionews.com/india-news/rbi-governor-urjit-patel-could-resign-on-november-19-report-175967">rift between the RBI and the government</a> has been widening over various issues.

Recently, the government cited never-used before provisions of law that gives it powers to issue directions to the RBI on mattes of public interest to resolve certain issues.

Citing Section 7 of the RBI Act - an unprecedented move in the 80-year history of RBI - the government wants RBI Governor Urjit Patel to address three prime concerns. They pertain to transfer of surplus funds, easing of NPA norms to kickstart lending and support growth, and easing liquidity crisis facing non-banking finance companies (NBFCs), sources had said.

These issues may figure during the RBI's board meeting on November 19.

According to the sources, the government would continue to press the RBI to relax norms to boost lending and transfer at least a third of its Rs 9.6 lakh crore reserve.

The government wants the RBI to part with most of its profit as dividend. The central bank, however, feels that it needs to retain a share of profits to make its balance sheet stronger, as per media reports.

The government wants Rs 3.6 lakh crore of surplus to be transferred to it, the reports said.

In its attempt to clean up the banking system, the RBI introduced Prompt Corrective Action (PCA) framework that places curbs on lending, expanding branch network and dividend distribution on weak banks.

It has also mandated banks to declare a delinquent borrower even if payments were overdue by a day.

The government wants some of these strictures to be eased to kick start lending and support growth, the sources said.

One of the nominee director on RBI's Central Board S Gurumurthy has reportedly written to RBI Governor Urjit Patel regarding Deputy Governor Viral Acharya raising the issue of the bank's autonomy at a public event recently.

Sources had said that the RBI's board meeting on November 19 was pre-scheduled and routine. The last meeting of the board was held in October.

Apart from Patel and his four deputies, there are 13 nominated directors on the RBI's board.

The reports of rift between the RBI and the government surfaced last month following the Finance Ministry reportedly started discussion with the RBI under the never before used Section 7 of the RBI Act.

In a statement last week, the ministry said the RBI's autonomy is "essential" and will be "nurtured".

Last week, Economic Affairs Seceretary Subhash Chandra Garg and government nominee on the Board took an apparent dig at Acharya's 'wrath of financial markets' comment in a tweet saying vital indicators of the economy were showing improvement.

Acharya, in his much talked about speech last month, raised the issue of autonomy of the central bank and said that undermining the central bank's independence could be "potentially catastrophic".

"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; their wiser counterparts who invest in central bank independence will enjoy lower costs of borrowing, the love of international investors, and longer life spans," Acharya had said.

The deputy governor's comment had generated controversy, hinting at the growing rift between the government and the central bank.

Keeping up the heat on the RBI, the government will continue to press the central bank to relax norms to boost lending and transfer at least a third of its Rs 9.

Keeping up the heat on the RBI, the government will continue to press the central bank to relax norms to boost lending and transfer at least a third of its Rs 9.6 lakh crore reserve, sources familiar with the discussions said. In recent weeks, the rift between the RBI and the government has been widening over various issues. Recently, the government cited never-used before provisions of law that gives it powers to issue directions to the RBI on mattes of public interest to resolve certain issues. Citing Section 7 of the RBI Act - an unprecedented move in the 80-year history of RBI - the government wants RBI Governor Urjit Patel to address three prime concerns. They pertain to transfer of surplus funds, easing of NPA norms to kickstart lending and support growth, and easing liquidity crisis facing non-banking finance companies (NBFCs), sources had said. These issues may figure during the RBI's board meeting on November 19. According to the sources, the government would continue to press the RBI to relax norms to boost lending and transfer at least a third of its Rs 9.6 lakh crore reserve. The government wants the RBI to part with most of its profit as dividend. The central bank, however, feels that it needs to retain a share of profits to make its balance sheet stronger, as per media reports. The government wants Rs 3.6 lakh crore of surplus to be transferred to it, the reports said. In its attempt to clean up the banking system, the RBI introduced Prompt Corrective Action (PCA) framework that places curbs on lending, expanding branch network and dividend distribution on weak banks. It has also mandated banks to declare a delinquent borrower even if payments were overdue by a day. The government wants some of these strictures to be eased to kick start lending and support growth, the sources said. One of the nominee director on RBI's Central Board S Gurumurthy has reportedly written to RBI Governor Urjit Patel regarding Deputy Governor Viral Acharya raising the issue of the bank's autonomy at a public event recently. Sources had said that the RBI's board meeting on November 19 was pre-scheduled and routine. The last meeting of the board was held in October. Apart from Patel and his four deputies, there are 13 nominated directors on the RBI's board. The reports of rift between the RBI and the government surfaced last month following the Finance Ministry reportedly started discussion with the RBI under the never before used Section 7 of the RBI Act. In a statement last week, the ministry said the RBI's autonomy is "essential" and will be "nurtured". Last week, Economic Affairs Seceretary Subhash Chandra Garg and government nominee on the Board took an apparent dig at Acharya's 'wrath of financial markets' comment in a tweet saying vital indicators of the economy were showing improvement. Acharya, in his much talked about speech last month, raised the issue of autonomy of the central bank and said that undermining the central bank's independence could be "potentially catastrophic". "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; their wiser counterparts who invest in central bank independence will enjoy lower costs of borrowing, the love of international investors, and longer life spans," Acharya had said. The deputy governor's comment had generated controversy, hinting at the growing rift between the government and the central bank.

Govt to continue pressing RBI for relaxing norms, funds: Sources

A speech by a top Reserve Bank of India (RBI) official last Friday blew the lid off an increasingly toxic dispute between the central bank and the government of Prime Minister Narendra Modi over monetary policy and who controls the institution's reserves.

While historically there have been differences between the <a href="http://www.wionews.com/india-news/government-very-upset-with-rbi-for-making-rift-public-sources-174359">RBI and the nation's governments</a>, the extent of the rift and its public nature are unprecedented.

By Wednesday morning, there were Indian media reports saying that RBI Governor Urjit Patel was about to resign. The RBI declined comment.

This followed three letters to the RBI from the finance ministry <a href="http://www.wionews.com/india-news/government-invokes-never-used-before-powers-to-issue-directions-to-rbi-report-174517">threatening to invoke Section 7</a> of the RBI Act that would allow the government to dictate policy to the central bank, according to a senior source with direct knowledge of developments.

But faced with declines in the rupee and government bond prices as investors got unnerved, the government issued a statement supporting the RBI's autonomy while indicating it would still be pressing very hard to have its own way.

In his speech, <a href="http://www.wionews.com/india-news/a-govt-that-does-not-respect-rbis-independence-will-incur-wrath-of-markets-rbi-deputy-governor-173752">RBI Deputy Governor Viral Acharya</a> said that undermining central bank independence could be "potentially catastrophic", and he even cited meddling by the Argentine government in the affairs of its central bank in 2010 - prompting big drops in that nation's financial markets - as a sign of how bad things can get.

The remarks were widely seen as a sign that the&nbsp; RBI was pushing back hard against government pressure to relax its policies and reduce its powers ahead of a general election due by May.

Finance ministry and RBI spokespersons declined comment.

The RBI is not statutorily independent, as the governor is appointed by the government, but it has enjoyed broad autonomy in regulating the banking sector. It is mandated to control inflation within a 2 to 6 percent range while keeping in mind India's economic growth objective.

HERE ARE SIX CRITICAL AREAS OF CONFLICT:

CASH GRAB

The government has made repeated calls for the RBI to hand over more money from the RBI's reserves to help fund its fiscal deficit. The RBI currently hands over its profits earned from various activities in the form of a dividend. But the government also wants to tap a share of the RBI's 3.6 trillion rupees ($48.73 billion) of capital reserves. The RBI has consistently pushed back against the demand.

OUT OF THE SHADOWS

The government wants the RBI to provide more liquidity to the shadow banking sector, which has been hurt by the defaults of major financing company, Infrastructure Leasing &amp; Financial Services (IL&amp;FS). Those defaults triggered sell-off in bonds and stocks of non-banking financial companies. The government has been asking the RBI for a dedicated liquidity window for these lenders similar to one allowed during the 2008-2009 global financial crisis.

JUST RELAX

The government has also been urging the RBI to relax its lending restrictions on 11 state-run banks. The curbs were imposed because the banks had a low capital base and major bad debt problems. The 11 are barred from lending unless they reduce their bad debt levels, improve their capital ratios and become profitable. The government says the restrictions have gone too far and have reduced the availability of loans for small- and medium sized businesses.

ENCROACHING

The RBI is also irked by the government's efforts to trim the central bank's regulatory powers by proposing to set up an independent payments regulator. Currently the RBI regulates all payments and settlements in the economy. The government says it wants a separate payment regulator which will be able to adapt to rapid changes in technology.

BOARD INFLUENCE

The government appointed S Gurumurthy, a prominent BJP supporter and an affiliate of the Hindu nationalist Rashtriya Swayamsevak Sangh (RSS), to the RBI board earlier this year along with Satish Marathe, a former banker with ties to the RSS. Such political appointments have been unusual in the past as the RBI board's external members have mostly been economists and industrialists. Traditionally, the RBI's board has approved decisions related to internal functions of the central bank and it has not interfered in its supervisory and monetary policy functions.

KEEPING MUM

Senior government officials, as well as BJP and RSS officials, are angry that the RBI decided to go public over the quarrels. Acharya made it clear he had been asked to address the independence question by Patel and in a show of unity the three other deputy governors attended his speech. In its statement concerning autonomy on Wednesday, the government stressed that it will keep discussions confidential.

WHY IT MATTERS

FOR GOVERNMENT

The central government has been under pressure ahead of regional polls due at the end of 2018 because of weak farm prices and surging fuel costs, which have been hurting rural incomes. The government recently cut excise duty on gasoline and diesel, adding to pressure on its deficit.

The Budget is also being undermined by muted revenue collection from recently introduced Goods and Service Tax (GST).

Added to this, the IL&amp;FS woes have led to a liquidity crunch across much of the shadow banking sector and throttled off some lending.

All of this could slow a $2.6 trillion economy, the world's sixth largest, only months before the general election. To prevent that from happening, Prime Minister Narendra Modi is expected to spend more on populist programmes, including boosts to rural wages, fuel subsidies and buying crops at a guaranteed minimum price.

FOR INVESTORS

The rift has created political and economic uncertainty. Investors want policy continuity from both the RBI and the government to ensure inflation is kept in check and economic stability is maintained.

A persistent fall in the inflation rate since 2014 in a country that was used to volatile price pressures instilled confidence in the central bank and attracted investors. However, investors fear such hard-earned economic gains could be at risk if the government can pull the RBI’s strings.

A speech by a top Reserve Bank of India (RBI) official last Friday blew the lid off an increasingly toxic dispute between the central bank and the government of Prime Minister Narendra Modi over monetary policy and who controls the institution's reserves.

A speech by a top Reserve Bank of India (RBI) official last Friday blew the lid off an increasingly toxic dispute between the central bank and the government of Prime Minister Narendra Modi over monetary policy and who controls the institution's reserves. While historically there have been differences between the RBI and the nation's governments, the extent of the rift and its public nature are unprecedented. By Wednesday morning, there were Indian media reports saying that RBI Governor Urjit Patel was about to resign. The RBI declined comment. This followed three letters to the RBI from the finance ministry threatening to invoke Section 7 of the RBI Act that would allow the government to dictate policy to the central bank, according to a senior source with direct knowledge of developments. But faced with declines in the rupee and government bond prices as investors got unnerved, the government issued a statement supporting the RBI's autonomy while indicating it would still be pressing very hard to have its own way. In his speech, RBI Deputy Governor Viral Acharya said that undermining central bank independence could be "potentially catastrophic", and he even cited meddling by the Argentine government in the affairs of its central bank in 2010 - prompting big drops in that nation's financial markets - as a sign of how bad things can get. The remarks were widely seen as a sign that the RBI was pushing back hard against government pressure to relax its policies and reduce its powers ahead of a general election due by May. Finance ministry and RBI spokespersons declined comment. The RBI is not statutorily independent, as the governor is appointed by the government, but it has enjoyed broad autonomy in regulating the banking sector. It is mandated to control inflation within a 2 to 6 percent range while keeping in mind India's economic growth objective. HERE ARE SIX CRITICAL AREAS OF CONFLICT: CASH GRAB The government has made repeated calls for the RBI to hand over more money from the RBI's reserves to help fund its fiscal deficit. The RBI currently hands over its profits earned from various activities in the form of a dividend. But the government also wants to tap a share of the RBI's 3.6 trillion rupees ($48.73 billion) of capital reserves. The RBI has consistently pushed back against the demand. OUT OF THE SHADOWS The government wants the RBI to provide more liquidity to the shadow banking sector, which has been hurt by the defaults of major financing company, Infrastructure Leasing & Financial Services (IL&FS). Those defaults triggered sell-off in bonds and stocks of non-banking financial companies. The government has been asking the RBI for a dedicated liquidity window for these lenders similar to one allowed during the 2008-2009 global financial crisis. JUST RELAX The government has also been urging the RBI to relax its lending restrictions on 11 state-run banks. The curbs were imposed because the banks had a low capital base and major bad debt problems. The 11 are barred from lending unless they reduce their bad debt levels, improve their capital ratios and become profitable. The government says the restrictions have gone too far and have reduced the availability of loans for small- and medium sized businesses. ENCROACHING The RBI is also irked by the government's efforts to trim the central bank's regulatory powers by proposing to set up an independent payments regulator. Currently the RBI regulates all payments and settlements in the economy. The government says it wants a separate payment regulator which will be able to adapt to rapid changes in technology. BOARD INFLUENCE The government appointed S Gurumurthy, a prominent BJP supporter and an affiliate of the Hindu nationalist Rashtriya Swayamsevak Sangh (RSS), to the RBI board earlier this year along with Satish Marathe, a former banker with ties to the RSS. Such political appointments have been unusual in the past as the RBI board's external members have mostly been economists and industrialists. Traditionally, the RBI's board has approved decisions related to internal functions of the central bank and it has not interfered in its supervisory and monetary policy functions. KEEPING MUM Senior government officials, as well as BJP and RSS officials, are angry that the RBI decided to go public over the quarrels. Acharya made it clear he had been asked to address the independence question by Patel and in a show of unity the three other deputy governors attended his speech. In its statement concerning autonomy on Wednesday, the government stressed that it will keep discussions confidential. WHY IT MATTERS FOR GOVERNMENT The central government has been under pressure ahead of regional polls due at the end of 2018 because of weak farm prices and surging fuel costs, which have been hurting rural incomes. The government recently cut excise duty on gasoline and diesel, adding to pressure on its deficit. The Budget is also being undermined by muted revenue collection from recently introduced Goods and Service Tax (GST). Added to this, the IL&FS woes have led to a liquidity crunch across much of the shadow banking sector and throttled off some lending. All of this could slow a $2.6 trillion economy, the world's sixth largest, only months before the general election. To prevent that from happening, Prime Minister Narendra Modi is expected to spend more on populist programmes, including boosts to rural wages, fuel subsidies and buying crops at a guaranteed minimum price. FOR INVESTORS The rift has created political and economic uncertainty. Investors want policy continuity from both the RBI and the government to ensure inflation is kept in check and economic stability is maintained. A persistent fall in the inflation rate since 2014 in a country that was used to volatile price pressures instilled confidence in the central bank and attracted investors. However, investors fear such hard-earned economic gains could be at risk if the government can pull the RBI’s strings.

Why Modi government wants to increase control over the RBI

The Indian government has refuted allegations of interference in the functioning of the country&#39;s central bank, the Reserve Bank of India, stating it fully respects the independence and autonomy of the RBI.&nbsp;

The finance ministry was responding to allegations of an RBI union which accused it of infinging on the central bank&#39;s autonomy by appointing an official for currency coordination, PTI reported.

&quot;Consultations between the government and RBI are undertaken on various matters of public importance wherever such consultation is mandated by law or has evolved as a practice. Consultations mandated by law or as evolved by practice should not be taken as infringement of autonomy of RBI,&quot; the finance ministry said in a statement.

&quot;It is categorically stated that the government fully respects independence and autonomy of the Reserve Bank of India,&quot; the ministry said.

In a letter to RBI Governor Urjit Patel, the United Forum of Reserve Bank Officers and Employees had stated that employees were feeling &quot;humiliated&quot; by events since demonetisation because of &quot;blatant encroachment&quot; on RBI&rsquo;s exclusive jurisdiction on currency management.

The letter also said the RBI&#39;s autonomy and image have been &ldquo;dented beyond repair&quot;.

The union raised the issue after at least three former governors &nbsp;&mdash; &nbsp;Manmohan Singh (former prime minister), Bimal Jalan and Y V Reddy &nbsp;&mdash; &nbsp;flagged concerns about the central bank&#39;s functioning. Former deputy governors, including Usha Thorat and K C Chakrabarty too have voiced their worries.

&quot;An image of efficiency and independence that RBI assiduously built up over decades by the strenuous efforts of its staff and judicious policy making has gone into smithereens in no time. We feel extremely pained,&quot; the employees said in the letter.

The letter said the RBI staff has carried out its job excellently after the move to ban 87 per cent of the outstanding currency by the government.

(WION with inputs from PTI)

 
&nbsp;

The finance ministry clarified that consultations between the government and RBI on matters of public importance should not be taken as an infringement of autonomy

The Indian government has refuted allegations of interference in the functioning of the country's central bank, the Reserve Bank of India, stating it fully respects the independence and autonomy of the RBI. The finance ministry was responding to allegations of an RBI union which accused it of infinging on the central bank's autonomy by appointing an official for currency coordination, PTI reported. "Consultations between the government and RBI are undertaken on various matters of public importance wherever such consultation is mandated by law or has evolved as a practice. Consultations mandated by law or as evolved by practice should not be taken as infringement of autonomy of RBI," the finance ministry said in a statement. "It is categorically stated that the government fully respects independence and autonomy of the Reserve Bank of India," the ministry said. In a letter to RBI Governor Urjit Patel, the United Forum of Reserve Bank Officers and Employees had stated that employees were feeling "humiliated" by events since demonetisation because of "blatant encroachment" on RBI’s exclusive jurisdiction on currency management. The letter also said the RBI's autonomy and image have been “dented beyond repair". The union raised the issue after at least three former governors — Manmohan Singh (former prime minister), Bimal Jalan and Y V Reddy — flagged concerns about the central bank's functioning. Former deputy governors, including Usha Thorat and K C Chakrabarty too have voiced their worries. "An image of efficiency and independence that RBI assiduously built up over decades by the strenuous efforts of its staff and judicious policy making has gone into smithereens in no time. We feel extremely pained," the employees said in the letter. The letter said the RBI staff has carried out its job excellently after the move to ban 87 per cent of the outstanding currency by the government. (WION with inputs from PTI)

Indian govt respects central bank's autonomy, says finance ministry amid row

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