RBI fund transfer to push economy: Asian Development Bank

Asian Development Bank (ADB) president Takehiko Nakao has said the transfer of Reserve Bank of India’s surplus of Rs 1.76 lakh crore to the government will help stimulate the economy. He termed the decision an “appropriate policy” but warned against depending on such surpluses. “If used correctly, this money can provide stimulus to the economy,” he said at a media briefing.

The RBI’s central board had on Monday approved the transfer of a record Rs 1.76 lakh crore dividend and surplus reserves to the government. Nakao said while such fund transfers from the RBI cannot happen frequently, this year “it can be used for the government expenditure”. This surplus, he said, should be used to stimulate the Indian economy without compromising on the fiscal deficit targets.

Nakao is on a four-day visit to India, which concludes on Friday. The ADB chief met Prime Minister Narendra Modi on Thursday. The Manila-based multilateral bank expects India’s gross domestic product (GDP) to grow at 7% in the current fiscal and 7.2% next year. Nakao said the government’s recent decision to further liberalise the foreign direct investment (FDI) norms will also help the economy and that he was “not really worried about the future of India (as) Modi’s administration reforms have strengthened momentum” and the growth rate can fluctuate.


Noting that the ongoing trade conflict between India and China may help some industries in India, he said the general impact on currency exchange rates, the markets and the global economy will move quickly. “What is necessary for sound economic growth is investment in infrastructure, education and human capital,” Nakao said.

INDIA PROJECTS
ADB proposes to lend India $4 billion, of which $1 billion will be utilised for the private sector. Currently, ADB’s biggest sovereign as well as non-sovereign borrower is India.

Nakao said the bank supports the government’s Jal Jeevan Mission, and indicated that it may commit $500 million towards it. Launched on August 15, the mission aims to bring piped water to every household in the country.

“ADB’s sovereign lending to India in 2018 reached a record $3 billion, in transport, urban, irrigation, skills development, and intermediary finance for public-private partnerships,” the bank said in a statement. Nakao said ADB stands ready to commit more than $12 billion in lending over the next three years, averaging annually over $3 billion for sovereign operations and $1 billion for non-sovereign.