India eyes ₹1 lakh crore bonanza from central bank, aiding budget

livemint.com:

central bank is expected to pay up to ₹1 lakh crore ($12 billion) as dividend to the federal government, economists said, a move that would boost New Delhi’s coffers and help meet its budget deficit target. The Reserve Bank of India’s central bank of directors is expected to meet this week and is likely to approve a dividend ranging between 800 billion to one trillion rupees, according to economists’ estimates. That compares with a transfer of 874.2 billion rupees last year and the government’s own target of 1.02 trillion rupees, which includes dividends from state-controlled banks.

If the RBI pays out a dividend worth one trillion rupees, it will be the highest in five years. The higher dividend payout is likely to help the federal government achieve its fiscal deficit target of 5.1% of gross domestic product in the current financial year. It would also likely shore up revenues for any new government that takes office after general elections conclude early next month, allowing it greater spending flexibility.

A big surplus transfer “will help the government in meeting any shortfall in disinvestment receipts and create room for funding welfare programs after the elections," said Teresa John, an economist with Nirmal Bang Institutional Equities, by phone. She forecasts the dividend payout to be around one trillion rupees. The RBI makes an annual payout to the government from the surplus income it earns on investments and valuation changes on its dollar holdings, and the fees it gets from printing currency.