A virtual talk by Viral Acharya, former deputy governor of Reserve Bank of India, hosted by The Indian Institute of Management – Ahmedabad (IIM-A), was disrupted by chants of ‘Jai Shri Ram’ and ‘Bharat Mata ki jai’ even as other attendees protested and sought them to be removed.
The talk was on ‘Fiscal Dominance: A Theory of Everything in India’.
In the five-point agenda that Acharya listed out for getting the debt-to-GDP and fiscal deficit back on track through fiscal reforms were, “reorientation of expenditure away from short-term populist measures to meaningful long-term multipliers that can only be achieved through health, education and infrastructure”.
He also lamented that the monetary stimulus announced by the government for Covid-19 did not recognise losses.
Acharya called for an objective monitoring of consolidated debt and deficit numbers of the government which required an “independent bipartisan fiscal council that will hold a mirror to the government’s budgets and every budget should be approved by this council before it is announced…”
According to him, “a very significant disinvestment programme needs to be undertaken… Unless fiscal reforms are undertaken, persistent pressure to lean on the central banks and other regulators to weaken the norms will continue…”
Acharya highlighted that Covid-19 has “only increased the urgency to adopt these reforms because the infection curve is far worse than what we thought it might be, at the start of the pandemic.”
Acharya also stressed on the importance of dissent and to lean against fiscal dominance as the first compromise is the start of the next compromise and it does not bode well to relent to short-term populist pressures of the government.
Commenting on the monetary stimulus laid out by the government in light of the pandemic, Acharya said, “Covid is such a large shock that some accommodation makes sense… In my view, six months debt moratorium is more than adequate… What is not a part of the package, and that is my continual lament, is there is no recognition in the package that there will be losses… there is no capital plan that has been announced yet…”
Acharya, who resigned from RBI in July 2019, six months before his term was scheduled to end and is currently a professor of finance at the New York University Stern School of Business was addressing a webinar centred on his latest book, ‘Quest for Restoring Financial Stability in India’, at a talk organised by the Indian Institute of Management, Ahmedabad (IIM-A) on Wednesday.
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