Subhash Chandra Garg’s exit and Bimal Jalan report: Did dissent on surplus transfer trigger top official’s ouster from FinMin?

What will Subhash Chandra Garg’s abrupt exit from government mean for Bimal Jalan report on Reserve Bank of India’s capital surplus transfer to the government? Garg seeking voluntary retirement from service has left many surprised. Especially because the decision to resign from the government service came after he was transferred to the Power Ministry. For Garg, Power Ministry is a demotion from the economic affairs. Also, note that Garg’s exit happens shortly after his reported dissent note on the Bimal Jalal Committee report on Reserve Bank of India's (RBI) economic capital framework (ECF).The Jalan panel, which was formed in December 2018 on ECF, is yet to table its report. The committee was formed as a consensus solution after a long, public fight between the RBI and the government on the issue of RBI’s capital surplus transfer to the government. Jalan panel's recommendations will be crucial to settle the debate on RBI's surplus transfer to the government.Garg was instrumental in mooting the idea of tapping excess funds from the banking regulator. With Garg’s exit, the question arises whether the Jalan panel will have to rework its report seeking fresh inputs from the Finance Ministry.The ECF is one issue, but Garg has spearheaded too many controversial battles for the Finance Ministry with the RBI. This includes the Finance Ministry’s endless battle with Urjit Patel’s RBI on a range of issues including public sector bank (PSB) dual regulation, RBI’s governance and so on.[caption id="attachment_7057111" align="alignleft" width="380"] File image of Subhash Chandra Garg. Pic courtesy: PIB[/caption]The RBI-government tussle intensified post-former deputy governor Viral Acharya’s public outburst and after reports speculated that the government threatened to invoke Section 7 of the RBI Act to overrule the central bank on controversial decisions. Garg had played a crucial role in defending the government’s interests.Garg is a 1983 batch IAS officer of the Rajasthan cadre and has been working as the secretary in Department of Economic Affairs since June 2017. Garg came to the Centre in 2014 and was appointed as the executive director in the World Bank where he stayed till 2017, when he was appointed the DEA secretary in June 2017.In March 2019, he was elevated as the finance secretary following the retirement of A N Jha. It is understood that Garg has played a key role in preparing the latest Union Budget presented by the country's first full-time Finance Minister, Nirmala Sitharaman.There is no clarity on what exactly is the crux of the Jalan panel report on the RBI’s surplus transfer. But according to a report, the panel might recommend RBI’s capital surplus transfer to the government over a period of 3-5 years. However, there are also reports that suggested Garg—a member of the panel—apparently dissented with this decision and insisted on a lumpsum transfer.There was another proposal in the Budget that said market regulator Securities and Exchange Board of India (SEBI) should constitute a reserve fund, and 25 percent of the annual surplus of the general fund should be credited to this reserve fund. After meeting all expenditures, the SEBI should transfer 75 percent of the surplus amount to the Consolidated Fund of India, according to the Budget proposal, it said.It is no secret in Delhi’s power corridors that Garg played a major role in stepping up the demand for the share in capital reserves from the regulators to the government and his proposals weren’t often welcomed by the RBI and SEBI. Garg’s exit once again puts limelight on the surplus transfer debate.