RBI dividend boost to help in improving budget math

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₹16.85 trillion in the interim budget presented in February.The Centre narrowed its fiscal deficit target for FY24 to 5.8%of GDP in the Revised Estimates (RE), lower than the budgeted fiscal deficit estimate of 5.9%, on the back of robust tax collection and higher dividend payouts. Also Read: Banks may see waiver of provisioning of loans to MSMEsOn Wednesday, the RBI approved a dividend of ₹2.11 trillion for the Central government for FY24 – a massive 141% higher than in FY23. To be sure, the fiscal deficit as a share of GDP would also depend on the economic growth rate and the inflation trend, in addition to adjustments to spending and changes in receipts.The latest dividend payout from the RBI will be instrumental in compensating for any slippages in tax revenue or increased public spending in FY25, and ensure fiscal deficit reduction is in sync with the committed glide path of 4.5% by FY26, experts said.

Also Read: RBI's record dividend of ₹2.11 trillion to help Centre's FY25 fiscal deficit, lower bond yields"The Centre is pursuing an aggressive fiscal deficit target at 5.1% of GDP in FY25. High tax buoyancy is seen as a major enabler to attain this goal. However, slippages cannot be ruled out, particularly in GST," said Debopam Chaudhuri, chief economist at Piramal Enterprises Ltd."Factors like inflation, high interest rates and better compliance also contributed to collections.

As inflation and interest rates decline in FY25, GST collections may witness a scale-down. The dividend windfall can come in handy and complement sagging tax revenues," he added. Both direct and indirect taxes reported buoyancy in FY24.