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Modi govt ‘planning demonetisation part-II’ to help its ‘crony friends’: Congress on RBI row

Congress spokesperson Abhishek Singhvi claimed the Modi government earned a windfall gain of Rs. 12 lakh crore in the past four years through heavy taxation on petrol and diesel.

SNS | New Delhi |

The Congress has accused the Modi government of “trampling” on the RBI’s institutional integrity and alleged that it was seeking around Rs. 3.6 lakh crore from the central bank to distribute electoral sops ahead of the general elections.

Congress spokesperson Abhishek Singhvi said RBI reserves, from which the government is seeking money for its use, are the country’s wealth and alleged that the Modi government wants to distribute it to its “crony friends”.

“Spinning lies, weaving false narrative and knitting sugar-coated alibis is a nefarious ploy of the Modi government to trample on the institutional integrity of the RBI. The RBI reserves are the nation’s social wealth and the Modi government wants to distribute it to its crony friends,” he alleged.

Singhvi said that the Modi government’s “sinister overtures to pounce on the RBI treasury is demonetisation part-II”.

“‘Modi-made disaster of demonetisation’ shaved off 1.5 pc of India’s GDP and severely denigrated the institutional autonomy of the RBI, now PM Modi plans demonetisation part-II that will again shave off 2 pc of India’s GDP in one shot,” he claimed.

Singhvi said, according to public information, the Modi government is coercing the RBI to pay a special dividend of Rs. 3.6 lakh crore, equal to nearly 40 per cent of the reserves accumulated over decades, which is two per cent of India’s GDP.

“Staring at an imminent defeat in five states and the ensuing Lok Sabha elections, a desperate Modi government wants to grab the family silver of the RBI in order to indulge in pre-elections sop-splash,” he alleged.

“A cobweb of fraudulent narrative, which smacks of despotism and complete disregard for institutional integrity towards the RBI, is being carefully weaved by the Modi government so that it snatches away the family silver in an election season to hide its mal-governance and failures,” he alleged.

Singhvi alleged that the funds of the RBI will be used by the Modi government to recapitalize public sector banks, failing PSUs, “thereby benefitting crony friends in an election season”.

“What is the meaning of “fix appropriate economic capital framework of RBI” which is being discussed by the government?

“What is the need of this quick-fix solution, which will further deteriorate the contingency stability? How does the government seek to battle plummeting market confidence which will be a result of using the RBI reserves?” he asked.

Singhvi claimed the Modi government earned a windfall gain of Rs. 12 lakh crore in the past four years through heavy taxation on petrol and diesel.

“Why does it not use that Rs. 12 lakh crore to fund its ‘electoral lollipops’? Wouldn’t this money be used to recapitalize the PSUs and banks which will only benefit large crony friends of PM Modi?” he asked.

The government had on Friday clarified that it was not seeking Rs. 3.6 lakh crore capital from the RBI but was only in the discussion for fixing appropriate economic capital framework of the central bank.

“Lot of misinformed speculation is going around in media. Government’s fiscal math is completely on track. There is no proposal to ask RBI to transfer Rs. 3.6 or 1 lakh crore, as speculated,” Economic Affairs Secretary Subhash Chandra Garg tweeted.

Exuding confidence about government’s fiscal math, he said, it will stick to the fiscal deficit target of 3.3 per cent for the current financial year ending March 31, 2019.

The Congress has accused Prime Minister Narendra Modi’s government of being bent on “snatching” the contingency reserves of the RBI amid a tussle that has seen the central bank officials call out for greater autonomy.

The rift between the government and the RBI surfaced after Deputy Governor Viral Acharya in a hard-hitting speech pitched for “effective independence” of the central bank.

Acharya had said governments that do not respect central bank’s independence would sooner or later incur the “wrath of financial markets, ignite an economic fire and come to rue the day they undermined an important regulatory institution”.

Acharya emphasised that undermining a central bank’s independence is akin to committing a “self-goal” for any government.

There were also reports claiming that the government had invoked never-before-used powers under Section 7 of the RBI Act allowing it to issue directions to the central bank governor on matters of public interest.

(With PTI inputs)