oppn parties Centre Gets RBI Bonanza Before Full Budget

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  • Opposition slams Centre for Samvidhan Hatya Diwas, says the Constitution is being murdered on daily basis under the present BJP government
  • Centre notifies June 25 as 'Samvidhan Hatya Diwas'. This was the date on which Indira Gandhi imposed the Emergency in 1975
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  • Supreme Court grants interim bail to Arvind Kejriwal in the money laundering case in Delhi liquor policy case but he will remain in jail as he is under CBI detention in the corruption case in the same scam
  • Retail inflation rises to 5.1% in June, the highest in 4 months
  • Government to avoid merger of BSNL-MTNL. Instead, MTNL's operations will be shifted to BSNL to give the latter an all-India presence
  • Women's U-19 Asia Cup: India to clash with Pakistan on July 19
  • Paris Olympics badminton draws: P V Sindhu in easy group but gets a tough draw later while H S Prannoy and Lakshya Sen might clash in pre-quarter finals
  • After two consecutive wins, India look to seal series when they meet Zimbabwe in the 4th T20 today
Finance minister Nirmala Sitharaman presenting her 7th straight budget in Parliament today
oppn parties
Centre Gets RBI Bonanza Before Full Budget

By Our Editorial Team
First publised on 2024-05-24 16:23:13

About the Author

Sunil Garodia The India Commentary view

The Centre received an unexpected bonanza - the RBI approved the transfer of Rs 2.1L cr as surplus to it. This is 140% more than what was transferred in 2023 and much higher than what the government was expecting. This has provided the government a lot of breathing space in managing the budgetary accounts. It can either use the funds to reduce the fiscal deficit to the target of 5.1% aimed for the year or increase spending on infrastructure projects or use a mix of both. In all cases, full budget of the new government in July will have a lot less of financial jugglery and a lot more of solid numbers riding on this booty.

As per the numbers, the RBI dividend translates to between 0.6% and 0.7% of the GDP which is huge. The government had planned to reduce the fiscal deficit from 5.8% last year to 5.1% in this fiscal. The RBI dividend alone can help in achieving this. But that would not make sense as fiscal deficit has to be reduced by fiscal discipline which means curtailing revenue expenditure or generating additional income (through disinvestment, for one, where the government’s plans have not materialized in the last 10 years) and reducing revenue deficit. If the revenue deficit in 2024-25 remains the same or balloons further, the RBI largesse would have a negative effect as it will fail to bring fiscal discipline in the system. Hopefully, with the elections done and dusted (which means that there is no immediate need of playing to the gallery by announcing additional welfare schemes), the new government will show fiscal prudence and reduce both revenue deficit and fiscal deficit.

The NDA government has been following the path of fiscal consolidation since the last few years. It must continue to do so. The RBI bonanza is a one-off. It can be used wisely to achieve a lot of things but it must not lead to fiscal indiscipline.