Center to get almost Rs 1 lakh dividend increase from RBI to cushion lost income – The New Indian Express
Express press service
NEW DELHI: The Reserve Bank of India (RBI) has decided to distribute a very generous dividend of Rs. 99,122 crore or 0.5 percent of GDP to the government at a time when the renewed Covid-19 attack has taken its toll test public finances.
The excess transfer, which is double the expected amount from the central bank and the second highest payment on record (the highest being Rs 1.76 lakh crore in FY20), will give the government to grapple with budgetary difficulties additional leeway to mitigate the impact of new Covid-19 infections on people’s livelihoods.
In FY 22, the government budgeted Rs 45,000 crore as dividend receipts from the central bank alone and Rs 8,500 crore from nationalized banks and financial institutions.
This was 40 percent lower than the original budget estimate of Rs 89,649 crore for FY21 and about 14 percent lower than the revised estimate of Rs 61,826 crore.
The upside surprise, however, could have been driven by increased returns on domestic assets.
“The RBI recently allowed itself to record profits on its foreign exchange operations from a weighted average cost perspective. Our estimates show that this move could have helped the central bank increase returns on its foreign holdings. central bank income for the year, ”said Rahul Bajoria, chief economist for India at Barclays.
In addition, liquidity operations such as targeted long-term repo operations would also increase central bank profits.
It can also be noted that the RBI is moving to an April to March fiscal year from FY22 and therefore the latest figures are not really comparable.
“The board also approved the transfer of Rs. 99,122 crore as surplus to central government for the nine-month accounting period ended March 31, 2021 (July 2020-March 2021),” the RBI said. The surplus was also decided after setting aside the 5.50% emergency risk buffer under the revised Economic Capital Framework recommended by the Bimal Jalan Committee.
While the dividend is welcome, it is not enough to boost growth. Time and time again, Finance Minister Nirmala Sitharaman has said the government will look beyond budget deficits to revive a struggling economy.
For FY22, government spending is pegged at Rs 34.83 lakh crore, barely Rs 33,000 crore on FY21 – the smallest increase on record in decades – even as it seeks to keep spending high by pandemic period to accelerate the pace of economic recovery.
Revenues may come in to Rs. 16.5 lakh crore, down from the government estimate of 17.8 lakh crore due to a worsening outlook for India’s economic recovery over the past l FY22. Against this backdrop, the government will need to further increase Rs.1.75 lakh crore through divestments to pursue its fiscal deficit target for FY22 of 6.8 percent of GDP.
When presenting the budget, Sitharaman set the gross borrowing in the market – which also reflects the budget deficit – at Rs 12 lakh crore for the current fiscal year.
According to Aditi Nayar, Chief Economist, ICRA, the higher transfer will provide a buffer to absorb the indirect tax revenue losses expected in May-June 2021, linked to the impact of the now widespread localized lockdowns on the level of consumption on discretionary items. and contact intensive services.
Additionally, high commodity prices at a time of weak demand and pricing power would squeeze corporate margins in many industries, which would squeeze the growth of direct tax collections, Nayar said. .