RBI’s generosity is good for India’s fiscal glidepath, but not enough for oil price relief: Kotak Economist Bhardwaj

economictimes.indiatimes.com:

Upasna Bhardwaj, Senior Economist, Kotak Mahindra Bank. While disinvestment revenues remain a risk, higher subsidy payments, if any, will be cushioned, Bhardwaj told ET Online’s Gourab Das. Edited excerpts:Going by Kotak’s recent report, you see limited risks of fiscal slippage for this financial year in India. Is that solely because of the higher than expected surplus transfer from the Reserve Bank of India?Upasna Bhardwaj: You are right.

The government has clearly got a much better dividend from the RBI. However, any slippage on the growth forecast front will have an impact on the (budget deficit) ratio. In absolute terms, the (fiscal deficit) number could be slightly higher, but if the GDP base is higher, then the ratio still remains intact and it is vice versa.

There may be some amount of change happening because of probable downsizing on the nominal GDP growth that we expect compared to what the government is expecting. But having said that, there is a buffer at the moment from the dividend that the government has received from the RBI. So, that should help clearly.

Also Read: Modi-govt's resolve to narrow budget gap is stronger than the threatsWhat if the RBI surplus transfer was not so high this year?Upasna Bhardwaj: Then, there clearly could have been a risk because we do not know how the divestment process is going to continue. Then, we would have to weigh how every month the tax growth is emerging, how the expenditure patterns are, especially just ahead of general elections. So, the government cannot really afford to cut down on spending as much.