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5) Does the pay-out of ₹1.76 lakh crore to the union government damage the credibility of the Reserve Bank of India as an independent central bank? Critically analyse.(250 words)

Topic:Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

5) Does the pay-out of ₹1.76 lakh crore to the union government damage the credibility of the Reserve Bank of India as an independent central bank? Critically analyse.(250 words)

The hindu

Why this question:

The question is amidst the recent controversies of payout of ₹1.76 lakh crore to the government by the RBI in accordance with the recommendations of Bimal Jalan committee.

Key demand of the question:

The answer must address as to in what way the move somewhere has made the RBI lose its credibility yet once again.

Directive:

Critically analyzeWhen asked to analyse, you have to examine methodically the structure or nature of the topic by separating it into component parts and present them as a whole in a summary. When ‘critically’ is suffixed or prefixed to a directive, one needs to look at the good and bad of the topic and give a fair judgement.

Structure of the answer:

Introduction: 

In brief narrate the recent happenings between RBI and the government.

Body:

Explain What is the issue around RBI payouts this cycle of the year, why and in what way is it different. What is the controversy around the transfer? Explain how RBI earns money in a variety of ways.

Then discuss in what way such move has diluted the powers of RBI.

Conclusion:

Conclude with positives and negatives of the move.