New Delhi: The Reserve Bank of India (RBI) will pay a record dividend of Rs 2.1 lakh crore to the government for the fiscal year ending March 31, exceeding expectations.
Fitch Ratings' recent assessment on Monday highlighted the major impact of the Reserve Bank of India's (RBI) robust dividend announcement on the newly elected Indian government's fiscal plans.
With the RBI's record-high dividend transfer of 0.6 percent of GDP (from its operations in FY24, which exceeded forecasts, Fitch predicts it will help fulfill the FY25 deficit target of 5.1 percent of GDP. The rating agency also thinks that dividend income might potentially reduce the deficit beyond the existing target.
While waiting for a detailed breakdown from the RBI, Fitch sees rising interest revenue on overseas assets as a main driver of the increased RBI profits. This dividend will be allocated based on the new government's planned budget, which is scheduled to be announced in July following the June election results.
The government's intention to gradually reduce the deficit to 4.5 percent of GDP by FY26 has been signalled, with RBI-led Monetary Policy Committee (MPC) member Ashima Goyal expressing optimism about achieving fiscal consolidation goals, implying potential reductions in the targeted fiscal deficit for the current year.
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