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Govt should use RBI bonanza wisely

Govt should use RBI bonanza wisely

The increase in the transferable surplus is a result of the increase in the central bank’s interest income from its foreign and domestic assets and forex transactions.

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Last Updated : 29 May 2024, 23:11 IST
Last Updated : 29 May 2024, 23:11 IST
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The Reserve Bank of India’s decision to transfer an unprecedentedly high surplus amount to the government is a big bonanza for it. The board of the central bank decided to transfer Rs 2.11 lakh crore to the government and it will serve the government’s financial cause well at a time when it needs the money. The beneficiary will be the new government that comes to power post-June 4. Last year, the government had received Rs 87,416 crore from the RBI. In the interim budget for 2024-25, the estimate of receipts from the central bank, nationalised banks and financial institutions was Rs 1.02 lakh crore. The government will now get more than twice that amount from just the RBI. It will help to ease the financial worries of the incoming government to that extent. 

The increase in the transferable surplus is a result of the increase in the central bank’s interest income from its foreign and domestic assets and forex transactions. Its sound financial management is also clear from the higher provisioning it has done under the Contingent Risk Buffer (CRB). The buffer is maintained by the central bank to deal with any unforeseen contingencies and risks the economy may have to face. It has now raised the level of provisioning by 50 basis points, from 6% to 6.5% of its balance sheet size for 2023-24. It is an indication of the central bank’s confidence in the economy. At the same time, it has bolstered the ability of the economy to deal with any unexpected situation that may pose a threat to it, mainly because of problems in the international financial system. The surplus was calculated on the basis of the norms prescribed by a committee headed by former RBI Governor Bimal Jalan.  

The higher surplus will give the incoming government more fiscal freedom when it presents the full budget for the financial year. The fiscal deficit can be further brought down with the new income. The government had promised in the budget to bring down the deficit from 5.8% of GDP in 2023-24 to 5.1% in 2024-25. The government can also use the surplus money to increase spending on welfare measures or capital expenditure. The additional resources will also help the government to make up any shortfall in budgeted income caused by unexpected developments or failure to meet disinvestment targets. Better control over the fiscal deficit will also help the government to deal with issues like inflation, which has been on an elevated plane for many months and continues to be a threat to the economy. 

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