Government doesn't need RBI's reserves to meet fiscal deficit, says Arun Jaitley

Finance Minister Arun Jaitley on Monday made it clear that the government does not need RBI's reserves to bridge the widening fiscal deficit as the Lok Sabha voted the Supplementary Demands for Grants for 2018-19 to the tune of Rs 85,948.86 crore, including Rs.41,000 crore for bank recapitalisation.

Finance Minister Arun Jaitley. (Image: AFP)

NEW DELHI: Finance Minister Arun Jaitley on Monday made it clear that the government does not need RBI's reserves to bridge the widening fiscal deficit as the Lok Sabha voted the Supplementary Demands for Grants for 2018-19 to the tune of Rs 85,948.86 crore, including Rs.41,000 crore for bank recapitalisation. "This government's fiscal deficit track record has been better than any other government in history. We do not need RBI's reserves for (meeting the) fiscal deficit," he said, replying to a brief debate on the demands. India's fiscal deficit for the eight months till November stood at Rs 7.17 lakh crore, which is 114.8 per cent of the budgeted Rs 6.24 lakh crore. The Minister's assertion comes against the backdrop of a raging debate over the government's reported moves for securing the surplus reserves with the RBI, estimated to be around a few lakh crore of rupees, to fund government's social welfare schemes ahead of elections. Jaitley said the global standard for economic capital framework for central banks was to have around 8 per cent of their assets as reserves with even the most conservative nations having it at 14 per cent. "Does India need to have 27-28 per cent (as risk capital)... The money can be used for recapitalisation of banks or for poverty alleviation measures," he said, adding the government only wanted to have a committee to review the matter. The second Supplementary Demands for Grants for 2018-19 includes Rs 41,000 crore for recapitalisation of the public sector banks that have been hit hard by non-performing assets. Jaitley said the government's initiatives including the Insolvency and Bankruptcy Code (IBC) were bearing fruits and money stuck as NPA was now back into the banking system. "The balance sheets of public sector banks are improving due to the IBC as money is coming back into the system. Rs 3 lakh crore has already been recovered through IBC. Banks' ability to lend is also increasing," he said. Attacking the Congress, the Finance Minister said the asset quality review by the RBI initiated after this government took charge revealed the NPAs during the UPA regime were as high as Rs 8.5 lakh crore as opposed to the UPA's claim of Rs 2.5 lakh crore. Countering charges of a slowdown in the growth rate of the country's gross domestic product (GDP), he said: "India is growing at 7.5 per cent when the world is growing at 3 per cent. We are also growing faster than China." Jaitley also said that the government would continue to take all necessary steps to ensure that farmers get adequate minimum support price for their produce - 50 per cent higher than their input cost as promised. The demands for grants contain proposals involving a net cash outgo aggregating to Rs 15,069.49 crore and gross additional expenditure, matched by savings of the ministries and departments or by enhanced receipts and recoveries, aggregating to Rs 70,882.21 crore. Both treasury benches and the opposition members attacked each other during discussion over the supplementary demand. Taking part in the debate, most opposition members raised farmer's distress issue and took a dig at the government over implementation of Goods and Services Tax (GST) and demonetisation reforms. Bhartruhari Mahtab of BJD sought to know from the government the steps being taken to improve the governance in the banks. TMC MP Saugata Roy said the economy was in "doldrums" and asked the Centre about the resignation of RBI Governor Urjit Patel. "The biggest blunder of the Modi government was to hurriedly implement GST and demonetisation. These were the cruel steps of the government. Many businessmen like Nirav Modi, Mehul Choksi and Vijay Mallya have fled after defrauding banks," Roy said. He said the government has not come out with the figures on the number of people who have lost jobs due to demonetisation and asked the Finance Minister to state the number of small businesses that had closed due to implementation of the GST. Opposing the supplementary demand, Samajwadi Party MP Dharmendra Yadav said: "I am against it because the problems are increasing day by day though five budgets have passed. Over 60,000 farmers have committed suicide in NDA regime. Potato is being thrown on roads and farmers are not getting proper cost of their sugarcane crops." BJP MP Anurag Thakur, however, supported the draft, saying "the fiscal deficit is now 3.8 per cent which never came below 6.8 per cent during UPA government". Labelling MGNREGA as the "mother" of corruption, BJP MP Nishikant Dubey said that it was due to MGNREGA that the fiscal management of the Central government was affected. After the implementation of Aadhar and Biometric, around Rs 60,000-70,000 crore had been saved, he said.