The Reserve Bank of India (RBI) is considering doubling its dividend payout to the Indian government, which could help bridge the country’s fiscal deficit. The move comes as the government is struggling to meet its revenue targets due to a slowdown in the economy and a drop in tax collections.
The RBI is one of the largest sources of revenue for the government, with its dividend payout accounting for a significant portion of the government’s non-tax revenue. In the last fiscal year, the RBI paid a dividend of Rs 1.23 lakh crore to the government, which was higher than the budgeted amount of Rs 90,000 crore.
The central bank’s decision to increase its dividend payout could provide some relief to the government, which is facing a widening fiscal deficit. The fiscal deficit is the difference between the government’s total expenditure and its total revenue. A higher fiscal deficit means that the government is spending more than it is earning, which can lead to inflation and other economic problems.
The government had set a target of reducing the fiscal deficit to 3.3% of GDP in the current fiscal year, but it is likely to miss this target due to lower-than-expected revenue collections. The RBI’s increased dividend payout could help offset some of this shortfall and prevent the fiscal deficit from widening further.
However, some experts have raised concerns about the RBI’s decision to increase its dividend payout. They argue that the central bank should retain more of its profits to strengthen its balance sheet and prepare for any future contingencies.
The RBI’s decision to increase its dividend payout also raises questions about its independence. The central bank is supposed to operate independently of the government and make decisions based on economic considerations rather than political pressure. Some experts fear that the RBI’s decision to increase its dividend payout could be seen as a concession to the government and undermine its independence.
In conclusion, the RBI’s potential doubling of dividends to Modi’s government could help bridge the fiscal deficit, but it also raises concerns about the central bank’s independence and its ability to prepare for future contingencies. The government should work towards increasing its revenue collections and reducing its expenditure to address the fiscal deficit in a sustainable manner.
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- Source: https://zephyrnet.com/rbi-dividends-to-modis-government-may-double-aiding-fiscal-gap/