The National Secretariat of the Communist Party of India (CPI) issued the following statement on August 28, 2019:
It is surprising that when our country’s economy is already facing turbulence and serious slowdown, instead of taking measures that will boost the economy, efforts are being taken which will further precipitate the economic instability.
RBI was specifically created as an independent institution mandated with the responsibility of ensuing the stability in the economy besides monitoring external stability, monetary stability and money supply. RBI is a totally autonomous body and is not expected to be an extension counter of the Finance Ministry or the Government. It has very specific tasks to perform which should not be interfered with. But what is happening now is a matter of serious concern where the RBI is apparently forced to bow down to the wishes of the Government to release their funds to bridge the fiscal deficit of the Government.
This was being objected to by earlier top brass of the RBI and now ways and means are being found to force the RBI to part with huge amounts in the name of transfer of surplus.
RBI’s Reserves are meant to protect the various risks to the economy. In fact the Reserves are not real reserves, rather it depends on the market fluctuations on gold price, dollar rate and rate of interest on Bonds. It is a notional gross value of the Reserves.
Even while the surplus in the Contingency Fund can be transferred to the Government, what has been done by RBI now is to maintain the Reserve at 5.5 per cent at the lower band thus leaving no room with the RBI to meet any unforeseen contingent risk.
Hence, looking from every angle, the pressure on RBI to transfer such huge amount is fraught with risk to the economic stability of the country and hence avoidable.