RBI's payout unlikely to plug the huge govt revenue hole created by Covid

 

Last year the RBI's board approved a record payment of Rs 1.76 trillion ($23.5 billion) to the government, which included Rs 1.23 trillion as dividend and Rs 526.4 billion from its surplus capital.

India’s Finance Minister Nirmala Sitharaman can expect another payout from the central bank in coming weeks, but it’s unlikely to plug a huge government revenue hole created by the pandemic.
The Reserve Bank of India’s board, led by Governor Shaktikanta Das, is meeting Friday, and since August is typically the month the central bank makes its annual transfer to the government, expectations are running high that the RBI will disclose its dividend payout.

Last year the RBI’s board approved a record payment of Rs 1.76 trillion ($23.5 billion) to the government, which included Rs 1.23 trillion as dividend and Rs 526.4 billion from its surplus capital. This year, New Delhi has budgeted for a Rs 600 billion transfer, but local media has speculated authorities are expecting more. Analysts and economists are forecasting anything between 400 billion to 1 trillion rupees.

“Our estimate is for Rs 400-500 billion, so it may fall short of the budgeted levels and thereby adding to fiscal pressures,” said Kanika Pasricha, an economist at Standard Chartered Plc in Mumbai.​

Revenue is falling well short of projections as India’s economy heads for its first full-year contraction in more than four decades. At the same time, the government is being forced to spend more to cushion the blow from the pandemic, straining the budget deficit. The government can help bridge the funding gap by drawing more cash out of the central bank, sell state assets and push up borrowing, which is already at a record high.

Standard Chartered predicts the government’s fiscal deficit will surge to 7.4% of gross domestic product in the current fiscal year, more than double the government’s original target.