RBI comes to government rescue in fight against enlarged deficit

The Reserve Bank of India (RBI) has paid Rs 10,000 crore as additional dividend to the Centre to tide over its Budget deficit. The move may have occurred after the Centre declared that it is running a 120% fiscal deficit and is on the verge of breaching the deficit target for this year.

Sources in the government told DH that the RBI has paid an additional dividend to the finance ministry. Dividends from the RBI and public sector undertaking have a potential impact on the Centre's Budget deficit. This year, the RBI had halved the dividend payout to the government at Rs 30,659 crore.

Demonetisation and printing of new currency notes post that were one of the reasons for less payment of dividend by the RBI. Just before demonetisation in 2016, the Central bank had paid close to Rs 66,000 crore of its surplus generated out of its investment activities to the government.

The Centre had asked for Rs 13,000 crore from the RBI in addition to Rs 33,659 crore surplus it already transferred in August 2017.

On Wednesday, the Centre had declared that its fiscal deficit in the 11 of the current financial year was 20% more than the revised estimates for 2017-18 due subdued revenue receipts. In the wake of GST revenues falling below expectations, the Centre has to depend on non-tax revenues to meet this year's fiscal deficit target.

The Centre had last month redrawn its fiscal consolidation roadmap pegging the fiscal deficit for 2017-18 at 3.5% of GDP against the 3.2% target projected earlier. This was the third time in the last five years that the Centre had reset its target.

Non-tax revenues collected in March will determine if the actual fiscal deficit for 2017-18 breaches the revised estimate of Rs 5.94 lakh crore. The data for entire 2017-18 revenue collection and that of March 2018 will be out at the end of April.

So far, the Centre has maintained that it will adhere to the Budgeted deficit targets. Centre's finances have come under stress in 2017-18 partly due to the implementation of the GST. In addition to lower indirect tax collections, the GST revenues were hit by about Rs 90,000 crore this year as the government would collect the GST for only 11 months in 2017-18. The GST collection for March will come after April 20  that will be accounted for in the next financial year.