Govt set to receive Rs. 28,000 crore interim dividend from RBI

The India government is all set to receive Rs28,000 crore as interim dividend from Reserve Bank of India (RBI) for the period July to December 2018, according to a statement

The India government is all set to receive Rs 28,000 crore as interim dividend from Reserve Bank of India (RBI) for the period July to December 2018, according to a statement

The step taken by the government could help them meet its revised fiscal deficit target of 3.4 percent of Gross Domestic Product (GDP) in 2018-19 amid a shortfall in revenue collections.

The RBI in a recent meeting concluded in this regard after a limited audit assessment and applying the Economic Capital Framework. This is a big salaute news for the government of India since it has announced numerous key populous decisions in the interim budget presentation ahead of the general elections which are set to be taken place in May 2019.

The transfer of the interim surplus will help the government to a certain extent in finance some of the policy initiatives such as the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme which involves a direct annual revenue transfer of Rs 6,000 per annum in three installments to farmers who have land holdings of up to two hectares.

The Central bank had earlier transferred Rs. 40,000 crore of excess surplus to the government in the month of August 2018 taking the entire dividend payout to the government to Rs. 68,000 crore for financial year. The Reserve bank of India follows a July-June fiscal calendar year. The move makes it the second successive year that the central bank will transfer interim surplus to the government.

The demand on the Reserve bank of India for more dividends and to part with a greater share of its capital has been a controversial issue between the central bank and the government. It has resulted in a public disagreement last year and is observed as one of the reasons for the sudden exit of the then Reserve bank of India Governor Urjit Patel.

The interim dividend will significantly help government ease fiscal stress and also help it in making the economy a boost up before the significant general elections in April-May this year. The government has projected the fiscal deficit target at 3.4 percent for the financial year 2019-20 in the Interim Budget 2019-20.

(The views expressed are that of author and not to be attributed to Devdiscourse)