RBI's cash gift to the government is likely to help to achieve optimistic targets and curbing revenue shortfall.
RBI will transfer Rs 1.23 lakh crore of dividend for the year 2018-19 and Rs 52,637 crore of surplus reserves, under the revised Economic Capital Framework (ECF) to the government. The government is poised to gain an excess of around Rs 58,000 crore from the RBI, which is likely to help the government to curb its revenue shortfall and achieve optimistic targets. Finance Minister Nirmala Sitharaman had lately announced to recapitalise the PSU banks with Rs 70,000 crore and to provide additional liquidity of Rs 20,000 crore to the housing finance companies (HFCs).
Five areas likely to benefit from the RBI’s move:
- From around Rs 23.11 lakh crore in FY19 to Rs 27.86 lakh crore in FY20, the government had assumed a very high growth in the size of the Budget. Garnering additional resources of Rs 4.76 lakh crore during a year when GDP growth is slated to slow down to less than 7 per cent and inflation at around 3-3.5 per cent was going to be challenging. In such an event, these additional resources from RBI will help to shore up revenue, said a report by Care Ratings.
- The government can also use this additional amount to spend on the future announcements to be made by the FM Nirmala Sitharaman.
- More money coming to the government either for meeting the budgetary target or for extra expenditure has been seen positively on the yield of government securities.G-sec yields have already shown signs of dipping.
- It is estimated that the shortfall in the GST collection will be around Rs 1.5 lakh crore. If the direct tax disappointed too, the fiscal pressure is likely to intensify. In that situation, the additional funds received by the government can help to bring down the pressure, according to the Kotak Economic Research report.
- The Kotak Economic Research report has suggested that the government should relook its scope to improve tax compliance and ways for asset monetisation such as divestment and land banks to reduce its dependence on the RBI transfers to bridge its fiscal gap.