The central bank board resolved to give the government Rs 2.11 lakh crore, which will be helpful to the government’s financial cause at the right time. The new administration that takes office after June 4 will profit from it.
The RBI had given the government Rs 87,416 crore last year. The estimated receipts from the central bank, nationalised banks, and financial institutions were Rs 1.02 lakh crore in the interim budget for 2024–25. From the RBI alone, the government will now receive more than twice that amount.To that extent, it will assist allay the financial concerns of the new government.
Source: CNBC-TV18
The rise in interest revenue from the central bank’s foreign and domestic assets as well as its FX transactions is what led to the increase in the moveable surplus. Its increased provisioning under the Contingent Risk Buffer (CRB) further demonstrates its strong financial management. The central bank keeps the buffer in place to handle any unanticipated events and threats the economy might encounter.
It has now increased the amount of provisioning for 2023–24 by 50 basis points, from 6% to 6.5% of the size of its balance sheet. It shows how confident the central bank is in the state of the economy.Due mostly to issues with the global financial system, it has also strengthened the economy’s capacity to handle any unforeseen circumstance that would endanger it. The surplus was determined using the guidelines established by a committee led by former governor of the Reserve Bank of India Bimal Jalan.
Source: CNBC- TV18
When the new government delivers the entire budget for the fiscal year, it will have more financial flexibility because of the larger surplus. With the additional revenue, the budget deficit can be reduced even more. In the budget, the government committed to reducing the deficit from 5.8% of GDP in 2023–2024 to 5.1% in 2024–2025.
The extra cash might also be used by the government to boost capital expenditures or welfare program spending. The extra funding will also assist the government in making up any revenue shortfall from unanticipated events or missed disinvestment goals. The government will be better able to handle problems like inflation, which has been on an elevated plane for several months and still poses a threat to the economy, if the fiscal deficit is better under control.
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