Bengaluru: The Reserve Bank is adequately capitalised, but the money should be used for fixing the financial system, not for financial deficit or financing government expenditure, Former Chief Economic Advisor Arvind Subramanian has said.
The Indian economist who was in the city on Thursday to read excerpts from his book 'Of Counsel: The Challenges of the Modi-Jaitley Economy' further added that according to economic principles savings should not be used for current consumption, but for long-term investment.
"If the reserve is used for deficit financing that would amount to raiding RBI and I would be extremely dissatisfied and disappointed with it".
Subramanian's comments comes after months of conflict between RBI and the government over its usage of reserve. The past week has been particularly chaotic for the reserve bank after Urjit Patel resigned as the RBI Governor. The Reserve Bank of India (RBI) has Rs 9.59 lakh crore reserves and the government wants the central bank to part with a third of its funds. According to the economist, the government should constitute a panel, which will hopefully vote against the using of RBI reserve.
Responding to a PTI query regarding RBI Board Member Swaminathan Gurumurthy's induction in August, he said, "I think he (Gurumurthy) amongst others, has articulated new alternative conceptions. I think, we have to engage with that to run an economy. All of us, including me, will plan to engage with that vision. I promise I will engage with that".
Swaminathan Gurumurthy was one of the board members who had criticized the monetary authority for being too tough when it came to lowering reserves and clearing bad debts.
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