RBI's Bumper Dividend: A Game Changer for India's Fiscal Outlook
A report by State Bank of India suggests that India's fiscal deficit could be reduced by 20 to 30 basis points due to a large dividend transfer from the Reserve Bank of India. This unexpected revenue gives the government flexibility in reducing its deficit or increasing spending on key areas.
- Country:
- India
In a pivotal financial development, the Reserve Bank of India's substantial dividend transfer to the central government might slash the fiscal deficit from the budgeted 4.5% to 4.2% of GDP, a State Bank of India report reveals.
The Union Budget for 2025-26 had anticipated Rs 2.56 lakh crore in dividends from the RBI and public financial institutions, but with the latest adjustment, the actual income surpasses expectations, affording the government a unique fiscal latitude. This financial boost not only propels fiscal stability but aids in yield curve management amid global monetary fluctuations.
The surplus stems from the RBI's liquidity adjustment facility operations and its interest earnings from securities. Post mid-December 2024, the central bank transitioned from absorbing liquidity to injecting funds into the system, resulting in a surplus of Rs 1.2 lakh crore by March 2025. Forward-looking projections suggest sustained surplus liquidity in FY26, buoyed by OMOs, dividend transfers, and a significant balance of payments surplus. SBI underscores the government's strategic choice between accelerating fiscal consolidation or amplifying developmental expenditures.
(With inputs from agencies.)
Google News