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Sunday, June 16, 2024, 12:12 pm

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The new government should start confidently thanks to the RBI’s transfer of excess.

The new government should start confidently thanks to the RBI's transfer of excess.
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The Reserve Bank of India board’s decision to transfer a record surplus of about ₹2.11 lakh crore to the Union Government for 2023-24 will boost the new government’s budget presentation in July. The transfer, which is more than double the previous year’s 87,416 crore payout and 1.02 lakh crore dividend-cum-surplus receipts from the banking and financial system and RBI, should give the next Finance Minister some leeway when calculating spending and fiscal maths.

 

The Indian central bank’s cautious asset management technique has resulted in a significant increase in moveable surplus during a period of global volatility and policy tightening to maintain price stability. The RBI’s 2023-24 balance sheet will be released soon, but the surplus was likely boosted by higher interest income from overseas securities and interventions in the foreign exchange market to reduce volatility in the rupee.

 

According to the weekly statistical supplement, total foreign exchange reserves reached $645.58 billion on March 29, up $67.1 billion in a year.
The RBI has increased the amount of funds set aside under the Contingent Risk Board (CRB) to meet unexpected economic risks.The central bank has increased provisioning by 50 basis points to 6.5% of its balance sheet size for 2023-24, indicating increased confidence in the domestic economy and strengthening the buffer against potential threats to stability from global financial developments.

 

The new government, who will take office after the June 4 general election, will have the opportunity to increase capital spending with the generous surplus transfer from the RBI. This comes at a time when the key engine of private consumption expenditure is still looking for sustained growth. Using the additional revenue to bridge the fiscal gap can strengthen the government’s finances and reassure investors of its commitment to the consolidation roadmap.
The RBI has quietly paved the stage for the next government to have confidence in the resiliency of the economy.

 

 

 

ABHISHEK VERMA


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