RBI may transfer ₹2.9-3.2 trillion surplus to government
What's the story
The Reserve Bank of India (RBI) is set to make a record surplus transfer to the central government for the current fiscal year. A Reuters poll predicts that the RBI will transfer between ₹2.9 lakh crore and ₹3.2 lakh crore to the Treasury. This record surplus transfer is largely due to profitable US dollar sales, after its intervention in the foreign exchange market to stabilize the Indian rupee. The RBI is expected to announce its transfer amount on Friday.
Reliance issues
Economists warn against overreliance on RBI transfers
Some economists are concerned that the government is becoming too reliant on these transfers from the RBI. These transfers have increased by 55 times in the last two decades. According to recently revised rules, originally laid out in 2019, the RBI is advised to maintain a contingency reserve of 4.5% to 7.5% of its balance sheet and transfer excess funds to the government.
Profit predictions
Dollar sales expected to boost RBI profits
Apoorva Javadekar, Chief Economist at Muthoot Fincorp, has predicted that the RBI's profits will increase this year due to massive dollar sales. "This year, the RBI's profits will go up even more because it has sold off dollars massively ... so it is expected that the dividends will (also) go up," she said. Dollar sales are now priced at historical average rates for FX purchases, much lower than current dollar-rupee rates.
Deficit forecasts
Fiscal deficit projections for current year
The median forecast from the poll pegged this fiscal year's fiscal deficit at 4.7% of GDP. Some economists even expect it could go as high as 5%, higher than last year's 4.4% and above government's target of 4.3%. Piramal Group Chief Economist Debopam Chaudhuri, who predicted a fiscal deficit of 4.6%, said it would amount to over ₹18 trillion, more than government's estimate of around ₹17 trillion.