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RBI reserve should be used to fix financial system: Arvind Subramanian

The economic principles, moreover, say savings should not be used for current consumption, but for long-term investment, said Subramanian

Press Trust of India  |  Bengaluru 

Arvind Subramanian
Arvind Subramanian

The Reserve is adequately capitalised, but the money should be used for fixing the financial system, not for financial deficit or financing government expenditure, Former has said.

The economic principles, moreover, say savings should not be used for current consumption, but for long-term investment, he said Thursday.

"If the reserve is used for deficit financing that would amount to raiding RBI and I would be extremely dissatisfied and disappointed with it," he said, adding the central probably is massively capitalised, but the money should be used for fixing the financial system, not for financial deficit or financing government expenditure.

"Also, it should be done cooperatively, not adversarily," he added.

He further said the government could have found a way to solve its differences by setting up a panel, which hopefully would have shared the belief of not using the RBI reserve for deficit financing.

The of (RBI) has Rs 9.59 trillion reserves and the government, if reports are to be believed, wants the central bank to part with a third of that fund -- an issue which along with easing of norms for and raising liquidity has brought the two at loggerheads recently.

Responding to a PTI query on the comments on RBI Swaminathan Gurumurthy's induction, he said: "I think, he (Gurumurthy), amongst others, has articulated new alternative conceptions. I think, we have to engage with that to run an economy. All of us, me included, would plan to engage with that vision. I promise I will engage with that".

Gurumurthy should try avoiding being a party to build a perception of politicising RBI board appointments, the former CEA said.

Subramanian was in the city to read some the excerpts from his book - Of Counsel: The Challenges of the Modi-Jaitley Economy.

On the Swadeshi vs Videshi debate, he said both extremes should be avoided because theory talks about diversification.

"needs a portfolio. You get your Swadeshi and Videshi economists, but evaluate them on their merits. theory talks about diversification," the former CEA said.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Fri, December 14 2018. 11:00 IST
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