Government In Talks With RBI For Higher Dividend
Government wants RBI to transfer more of the surplus generated in 2016-17.
The government is in discussion with the Reserve Bank of India (RBI) to transfer more funds out of the surplus it generated in 2016-17, Economic Affairs Secretary Subhash Chandra Garg told reporters on Thursday. The government had budgeted for a dividend transfer of Rs 58,000 crore from the RBI this year, said Garg.
On August 10, the RBI said that it will transfer Rs 30,659 crore to the government in the form of dividend for financial year 2016-17. This was nearly half of the Rs 65,876 crore paid out by the RBI in the previous year.
Detailed accounts released by the RBI as part of its annual report of Wednesday showed that the central bank had a Net Disposable Income of Rs 30,663 crore for the fiscal year ended June 30, 2017. However, the notes to accounts showed that the central bank had also transferred Rs 13,140 crore to its contingency fund. The RBI follows a July-June financial year.
“The RBI had a surplus of Rs 44,000 crore for the financial year 2016-17 and the government is discussing with RBI if it can transfer more funds to the centre,” Garg told reporters.
The lower dividend from the RBI had brought the government’s fiscal math into question, as it would imply that public sector banks and financial institutions would need to shell out over Rs 44,000 crore in the form of dividend this fiscal. This was unlikely given the stressed balancesheets of state-owned banks.
The government is targeting to bring down its fiscal deficit to 3.2 percent in the current fiscal. However, it has exhausted more than 80 percent of the fiscal deficit target in the first quarter alone as it has front-loaded both capital and revenue expenditure.
In a report dated August 11, Kotak Economic Research noted that the lower RBI dividend had disturbed the fiscal math by 0.2 percent of GDP. The research house added that it may be too early to determine the revenue side of equation.
“We need to watch for cues from direct tax collection, indirect tax collections, and any divestment upside,” said the report adding that the government can also opt for expenditure cuts later in the year if needed.