Does the idea of transferring the surplus capital from RBI to central government is a better solution to ease its fiscal pressure? Comment (200 Words)
Refer - Business Standard
Enrich the answer from other sources, if the question demands.
IAS Parliament 5 years
KEY POINTS
· The Economic Survey in 2016 suggested using the central bank’s surplus capital for recapitalizing public sector banks.
· Naturally, the government would want a higher transfer because it will help ease some fiscal pressure and increase expenditure in the short run.
· The transfer of capital does not create new revenue. It will shrink the size of the RBI’s balance sheet.
· As a result, the central bank would hold fewer securities, which will affect the future flow of income.
· Transfers like these can erode confidence in fiscal management.
· It is important that the central bank has enough capital to appropriately implement monetary policy and adjust to foreign exchange movement, among other things.
· Since the transfer from the central bank will, at best, be only a short-term relief, it should be used judiciously to improve the productive capacity of the economy.
· Transferring capital in a phased manner will allow the government to channelize funds more efficiently. The government would do well to not use this for day-to-day expenses or revenue expenditure because it will not be permanent and affect the future flow of income.
· At a broader level, the demand for higher transfer from the central bank, and the fact that a committee is addressing the issue, underlines the fiscal stress.
· For better fiscal outcomes, the government should evaluate its revenue and expenditure more realistically. Depending on transfers from the central bank or other regulators, higher tariffs on imports, or increasing the marginal rate of income tax for a small minority of rich taxpayers will do more harm than good in the long run.
Krish 5 years
Kindly review sir,Thank u
IAS Parliament 5 years
Good attempt. Provide facts and support your arguments. Keep writing.
K. V. A 5 years
Pls review
IAS Parliament 5 years
Challenges not needed, provide factual analysis for your view point. Keep writing.
Santosh kulkarni 5 years
Kindly review. Thanks.
IAS Parliament 5 years
Take a stance, transferring of surplus capital a better solution or not ?;provide arguments for that. Keep writing.
