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1.2 trillion rupees on the move: Modi’s greatest piece of purchase yet
Last week, the RBI (Reserve Bank of India) was taken aback by more than a surprise. Just when it was dealing with the uncomfortable series of events that led to the transfer of surplus 1.2 trillion rupees into the government of India; social media erupted.

It quickly realized that losing the battle regarding the transfer would only add fuel to the hoax of closing down nine commercial banks. RBI enjoys considerable amount of autonomy and independence in the largest democracy, and still, it had to kneel down to Modi’s alleged quick fix.

The RBI would have to vouch for the government in times of need, it is primarily what is expected of the institution; but there was a great deal of discomfort in how the government justified it. A committee set up under the ex-governor, Mr Bimal Jalan, cited how central banks would not need so much of surplus to carry out their affairs. Effectively, it was an order, not a request, which became the underlying discomfort behind RBI’s hesitancy in adhering to the views of capital transfer committee. Not that anyone expected the central lender to protest longer, it did however, request Mr Jalan to reconsider the decision at the face of various consequences. To say the least, it was embarrassing for a premier financial institution to be put under the public eye. The social media hoax was another ridicule of the sickly RBI. In the tales of grand conquests, the victorious army steals the wealth from the losing party. Similarly, the BJP led government in India are redefining all forms of state tools in favour of their interests.

Stolen wealth is most often than not used to correct economic blunders. Just like in the tales of grand conquests, the decision to transfer national wealth from the reserve bank is nothing new.

It is nevertheless baffling, that the money transfer is looping in the same direction. While the BJP government in India were imposing a comprehensive GST (Goods and Service Tax) policy, they would not have anticipated complaints from large industries over decreased consumer consumption. For a party that is now known to redefine the legitimacy of governance, falling prey to NBFC’s (Non-bank Financial Companies) incompetence or bankruptcy is a visible defeat. Unlike many other soaring economies, there are large group of subsidiary lenders operating in India. On hindsight, economic policies are barely creating tunnels through which the capital is getting recycled in the same loop. Revenues are not generating further revenues. It is merely closing down on its self-inflicted gap.

The Security and Exchange Board of India (SEBI) almost played with fire. Uncharacteristically, it proposed a framework to work together with the RBI in order to claim outstanding defaults from high value clients. The RBI was never going to agree with a defaming offer as such but the incident did fuel the argument of capital shuffling. It only makes the bluff look more real. A strategic plan to counter all measures that would have blocked the transfer of trillions. As Mr Jalan sheepishly implied how the importance of central bank and what is does is only limited to the public perception, RBI fought a fix in between larger or rather dangerous political agendas. Consolidating requests from SEBI to only fall into the whims of the government shows the lacklustre personality of the central funding institution. For the time being, Narendra Modi has his way, a theft of national treasure-like his opposition colleague Rajiv Gandhi expressed in the media. However, there will also be a far-fetched evaluation of Modi’s actions. A move of 1.2 trillion rupees in the same pot. Not by any means, a cunning cover up.

 

By Sisir Devkota

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