The article refers to the recent ₹99,122-crore transfer to the Centre
The Reserve Bank of India (RBI) can be characterised as a ‘free-ranging’ goose from the point of the surplus transfer alone, according to an article in the central bank’s latest monthly bulletin.
“With an unimpaired balance sheet, the free-range goose conducting conservative monetary policy with a fair degree of independence, produces golden eggs in the form of seigniorage worth 0.5 to 1 per cent of GDP.”
Seigniorage is the profit accruing to the issuer of legal tender, mainly as a result of the difference between the material costs of producing currency and its face value.
The observations in the article ‘State of the Economy’, put together by RBI officials, including Deputy Governor MD Patra, came in the context of the surplus transferred to the government raising considerable heat and dust in the media.
The Reserve Bank of India’s Central Board, on May 22 approved the transfer of ₹99,122 crore as surplus to the Centre for the accounting period of nine months ended March 31, 2021 (July 2020-March 2021). This was 73.50 per cent higher vis-a-vis the ₹57,128 crore transfer approved in the accounting year 2019-20.
The surplus, mainly stemming from saving on balance sheet provisions and employees’ superannuation and other funds, constitutes just 0.44 per cent of GDP (which is taken as a measure of seigniorage), the article said.
In 2020, the transfer of surplus from RBI to the Government was 0.29 per cent of GDP.
Further referring to research by Fry, Goodhart and Almeida, the article said the “battery farm goose”, bred specially for intensive egg-laying, can produce golden eggs in the form of inflation tax yielding 5 to 10 per cent of GDP.
“The ‘force-fed goose’ can produce revenue of up to 25 per cent of GDP for a limited period before its inevitable demise and collapse of the economy.
“All three forms of central bank geese have been sighted in recent years,” the article said.