The tussle over surfeit transfer has clipped the Centre’s wings as in future, being bound to the Economic Capital Framework, RBI will continue to keep a tight leash on funds On the face of it, the Reserve Bank of India’s (RBI) decision to transfer a whopping surplus of Rs 176,000 crore to the Government of India (GOI) for its accounting year July 2018-June 2019 gives the impression that the latter has got a bonanza. While, some argue that the Centre has “stolen” a humungous amount from India’s apex bank, which manages the currency and payment systems as also the borrowings of the Centre and States, others aver that this is easy money which the Centre will use for bridging its fiscal deficit....
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Category: Exchange rate & reserves
RBI surplus transfer – much ado about nothing
On the face of it, the decision of the Reserve Bank of India [RBI] – India’s apex bank which manages the currency and payment systems as also the borrowings of the Government of India [GOI] and of state governments besides supervising or regulating banks – to transfer a whopping surplus of Rs 176,000 crore to GOI for the year 2018-19 [for RBI, the accounting year is on July-June basis] gives an impression that the latter has got a bonanza. While, some argue that the centre has ‘stolen’ the money from the RBI [e.g. Congress], others aver that this is easy money which the centre will use for bridging its fiscal deficit. The reactions are exaggerated. First, of the total amount Rs...
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Stop using RBI as a ‘milch cow’
The union government has invariably rode piggy back on profit making public sector undertakings [PSUs] and public sector banks [PSBs] to boost its non-tax revenue [using a variety of means such as high dividend/special dividend, divestment of its stake at premium etc] for the purpose of keeping fiscal deficit [excess of total revenue over total expenditure] within the set target. However, little is known about a subtle role that Reserve Bank of India [RBI] – India’s central bank – plays in helping central government in its fiscal consolidation drive. It does so by transferring huge surpluses to the centre year-after-year. During the last three years viz. 2015-16, 2016-17, 2017-18, it transferred Rs 65,900 crore, Rs 40,600 crore and Rs 58,000 crore...
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Trump’s ‘hire local’ juggernaut – smashes Indian IT
An senior official of the Trump Administration has lambasted three leading Indian IT companies viz. Tata Consultancy Services [TCS], Infosys and Cognizant Technologies for resorting to ‘trickery’ for allegedly grabbing most of H1-B visas issued by the US Citizenship and Immigration Services [USCIS]. HI-B visas are issued to foreigners who have ‘theoretical’ and ‘technical’ expertise in specialized areas to work in local [read American] companies for temporary period. United States issues 85,000 such visas every year — 65,000 hired from abroad and 20,000 from those enrolled in US universities/colleges. Due to the heavy demand, USCIS which runs the program, receives several time more applications than it can grant and uses an electronic lottery to pick the ones that will go...
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Are Indian IT czars shooting in the mouth?
During the last one-and-a-half decade or so, the Indian I-T [information technology] industry has recorded unprecedented growth propelled mostly by exports. Of this, a disproportionately high share has come from increase in exports to USA. The industry has an aggregate revenue of over US$ 150 billion [2016] of which around US$ 100 billion [or 2/3rd] is contributed by export and the balance US$ 50 billion from domestic source. Within exports, USA alone accounts for over US$ 50 billion. This rapid growth helped all leading players viz. Tata Consultancy Services [TCS], Infosys, Wipro, Cognizant Technologies etc reap a financial bonanza. Even after distributing handsome dividends, they have accumulated monuments of cash running in billions of dollars. Of course, India has gained...
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Economic policies – NDA versus UPA
Some time back, Arun Shourie a senior minister in the then NDA [National Democratic Alliance] government under Vajpayee [1998-2004] and erstwhile member of BJP observed that the economic policies being followed by Modi – government are just a continuation of UPA [United Progressive Alliance] plus the “cow’ [a euphemistic reference to sacred animal worshiped by majority Hindu community in India]. Shourie’s view is shared by many thinkers. UPA – dispensation II [2009-2014] had pushed the country towards economic paralysis with all key indicators i.e. growth [manufacturing in particular], inflation, fiscal deficit, current account deficit [CAD], foreign exchange reserves and infrastructure etc showing dismal trend. In this backdrop and since, Modi is also following the same policies, they aver that outcomes...
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Modi’s prescription for economic resurgence
Critics have derided prime minister N Modi for absence of any major initiative or scheme for nation building in his independence day address on August 15, 2014. Some congress leaders even opined ‘he was giving an election speech’! With a pre-meditated and prejudiced mindset, they won’t be able to see any. One only needs to make an objective assessment to get to the bottom of what he gave to 1.25 billion country men and even to fellow citizens in our neighbour and beyond. Modi’s extempore speech covering a wide spectrum left no one in doubt that he gave us a recipe for social, cultural, economic and industrial, renaissance. This is eloquently captured in a couple of phrases that he coined...
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QE taper – Is India prepared to face onslaught?
The QE (quantitative easing) ‘tapering’ – though coming earlier than anticipated – has not led to the kind of turbulence that a mere indication/hint about this had led to in May, 2013. The impact on emerging market economies (EMEs) including India is minimal. Contrary to expectations that quantum of tapering would be steep viz., reduction in asset purchase by US$ 20-30 billion per month, US Fed has announced a reduction of US$ 10 billion a month – commencing January, 2014 – from current US$ 85 billion per month. The FOMC has also alluded to proposed wind down being ‘gradual’ and ‘calibrated’. Thus, unlike May when uncertainties gripped the scene, this time around there is an element ‘predictability’ and ‘certainty’. This...
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