India’s central bank fills Modi govt’s coffers

By Riyaz ul Khaliq

ANKARA (AA) - The unprecedented transfer of over $24 billion to Prime Minister Narendra Modi-led government from India’s central bank -- Reserve Bank of India (RBI) -- has come under severe criticism.

The country's main opposition Indian National Congress party said that the central bank's move would "bring down the cash reserve of the central bank to a minimum".

Slamming the move, India’s left-wing party said that country’s economy had never been "assaulted so mercilessly".

RBI on Monday night announced that it had decided to transfer a record 1.76 trillion Indian rupees ($24.56 billion) to the government.

The surplus amount transferred to the Indian government is "almost double the previous amount [of 2014]," said Business Standard, a local daily.

A social affairs commentator G Sampath told Anadolu Agency that the central bank's move sets an "unhealthy precedent".

"It puts a big question mark over RBI's Independence [but] it will help fund the govt's welfare schemes and meet fiscal deficit target," Sampath said.

Senior Congress parliamentarian Anand Sharma told reporters in Delhi that two former RBI governors Raghuram Rajan and Urjit Patel had objected to the transfer of RBI's surplus.

"India is in a deep financial crisis. The economy is in shambles, all indicators of development are low. India’s GDP is continuously falling," daily Indian Express quoted Sharma. He added that the RBI’s surplus money was "meant to be used during emergency situations".

India witnessed GDP growth rate hitting a five-year low of 5.8% in the January-March quarter early this year.

Surplus money is defined as "excess income over expenditure".

The RBI announcement came few days after Moody’s Investors Service revised downwards India’s GDP growth forecast for the current year to 6.2%. It had said that Indian economy remains sluggish due to a combination of factors such as weak hiring, distress among rural households and tighter financial conditions.

For the last six years, "this transfer has ranged between Rs 30,000 crore [$4 billion] and Rs 65,000 crore [$9 billion]", said a publication by The Wire, a local media source.

"While it does not immediately do the RBI any harm, the fact remains that the central bank now has far less wiggle room in the event of a financial catastrophe, since its reserves have been emptied to their minimum levels or thereabouts. That is, it has the minimum amount to deal with a crisis, but extra cash always comes in handy," wrote T.C.A. Sharad Raghavan in The Hindu daily.

Communist Party of India (Marxist) leader Sitaram Yechury attacked the Modi-led Bharatiya Janata Party (BJP) government in a series of twitter posts.

"Since 2014 Modi government has appropriated 99% of RBI’s profits every year to fund its propaganda campaigns. It has now siphoned off ₹1.76 lakh crores [$24 billion] ostensibly to recapitalize banks which have been looted by Modi’s cronies," Yechury alleged.

Raghavan termed the surplus transfer as "one-time bonanza", and added: "[It] does not fix the fact that tax revenues -- both direct and indirect tax -- are coming in much lower than they need to".

Congress spokesperson Randeep Singh Surjewala in a Twitter post said: "Contingency Reserve of RBI meant for extreme financial emergencies & war-like situations is being used by BJP Govt to bury its monumental mess on economic front! BJP has finished RBI's credibility!"

Government, on the other hand, defended the RBI move. "Any suggestions about the credibility of RBI, therefore, for me seems a bit outlandish," Indian Finance Minister Nirmala Sitharaman said.

She said that a committee appointed by the bank had eminent experts who made the transfer decision.

"They gave a formula based on the decided amount," she added.