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Showing posts from December, 2018

Modi Takes Over the RBI

As I opined in my previous article , the RBI governor Dr. Urjit Patel has now resigned finally after a long tussle with the Narendra Modi government. As I discussed earlier, Modi government is under intense pressure to boost the growth and employment figures in the run-up of its reelection next year. The only way in which governments know to boost growth is to increase spending on fiscal programs like the bullet train project or the smart city project or Swaccha Abhiyan etc., etc. And such increased spending is only possible when the central bank monetizes their ballooning fiscal deficit by printing currency notes and allowing commercial banks to boost their lending by relaxing regulatory norms. The problem of non-performing assets (NPAs) for Indian banks is very severe , and RBI was worried that situation will get out of hands if immediately something is not done about this explosive issue. That prompted RBI to tighten their lending norms, which Modi government didn’t l