Facing fiscal reality: Media response




M G Warrier                   
July 22, 2019
Facing fiscal reality
This refers to your editorial “No windfall gain” (July 22). Ever since Economic Survey 2016 erroneously estimated the quantum of RBI’s reserves inflating the figures by including fictitious revaluation reserves and unilaterally suggested avenues for deployment of the assumed surplus, there have been clarifications and analyses including Dr Raghuram Rajan’s September 3, 2016 Delhi speech and Dr Rakesh Mohan’s three-part article published in October 2018 in this paper. It is intriguing that certain quotes from the ECF Panel’s thoughts are being selectively leaked out or scooped and being used for speculation in the mainstream media.
The reference is to the reports suggesting that Jalan Panel may recommend transfer of RBI's surplus in tranches over a few years and about the expected quantum of surpluses. There may be reasons for certain quarters to selectively leak out the "thinking" of Jalan Panel giving an opportunity for media and analysts to speculate, when the report is being finalized. Let's wait till the report appears in the public domain.
The expectations and directions being expressed/issued by GOI in the recent past regarding fund management and appropriation of income by national level organizations which are government-controlled, affect the functional freedom (not to be confused with autonomy) available to them under statutes. The reference here is to forcing RBI to transfer advance against future surpluses and fixing a percentage (75 in SEBI's case) for transfer of surplus income.
As brought out in the editorial, Centre may not be a net gainer by reducing the real value of RBI’s reserves as the government may have to find takers for the securities/assets RBI may sell to monetize unrealized revaluation reserves. In the public eye, the balance sheet of RBI will become weak as the central bank’s capital remains static at Rs 5 crores and the balance sheet strength depends on its reserves in different ‘pockets’.  
In the fitness of things, statutory bodies should have functional freedom to manage their funds in a professional and transparent manner within the statutory provisions.
 M G Warrier, Mumbai

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