Arun Jaitley, India’s finance minister, speaks during a business summit in New Delhi. (Photographer: Anindito Mukherjee/Bloomberg)

Don’t Need Extra Funds From RBI To Meet Fiscal Deficit Target, Says Jaitley

Finance Minister Arun Jaitley said the government doesn’t need any extra funds from the Reserve Bank of India or any other institution to meet the fiscal deficit target.

He, however, said the extra funds, which may accrue from the new capital framework of the RBI, can always be used for poverty alleviation programmes over the years by future governments.

“We don’t need any extra funds from any other institution to finance our fiscal deficit. Let’s be very clear that’s not the intention of the government. We are not saying that in the next six months give me some money. I don’t need it,” the minister said in an interview to television channel Times Now.

India’s fiscal deficit is slated to come down to 3.3 percent of GDP at the end of the ongoing financial year.

Responding to criticism that the government was eyeing the RBI’s reserves, Jaitley said globally central banks have a capital framework which determines the amount of funds that ought to be maintained as reserves.

All we are saying is there has to be some discussion and some norms under which the RBI will have a capital framework.
Arun Jaitley, Finance Minister

Jaitley added that surplus funds could be used for poverty alleviation programmes by future governments over the next several years.

The RBI board at its meeting earlier in this month decided to set up a high-level committee for examining the Economic Capital Framework to determine the appropriate levels of reserve the central bank should hold.

The RBI is reported to be holding a massive Rs 9.59 lakh crore of reserves.

Answering questions with regard to the autonomy of the RBI, Jaitley said it has to be exercised within the framework of law.

The government’s viewpoint is that we respect and will always maintain the autonomy within the framework of the laws which have been laid down.
Arun Jaitley, Finance Minister

The government, Jaitley said, would continue to flag issues with the RBI in the larger interest of the economy, and there has to be coordination between the central bank and the government

“If there are sectors of economy which are starved of liquidity or credit, as a sovereign government, we certainly will flag those issues wherever the RBI has the authority to decide certain things,” the minister said, adding that there is no institutional failure.

He also said that during the Congress-led UPA regime, fiscal deficit went as high as 6 percent of GDP.

“We inherited a 4.6 percent fiscal deficit. This government since 1947 in five-year tenure has the best record of fiscal prudence that any government has. From 4.6 percent this year we are going to bring it down to 3.3 percent.”