7 mins read . 23 May 2023
For the financial year 2023-24, the Indian government will have less to worry on the revenues front. The RBI, as a matter of policy, shares part of its surplus with the government each year and this amount is included in the Union Budget document. Thus, the RBI dividend based on the surplus of FY23 will be declared in May 2023 and will be included as revenues in the fiscal year 2023-24 by the central government. In the Annual Meeting of the Central Board of the Reserve Bank of India (RBI), it was officially decided to transfer a sum of Rs87,416 crore as surplus/dividend to the Central government. However, the RBI has also worked towards making its approach more conservative. To that end, the central board of the RBI has decided to enhance the contingency risk buffer from 5.50% to 6.00%. How does this RBI dividend stack up, and what are the implications of this dividend.
In this table below, we capture the dividends (surplus) transferred by the RBI to the central government in each of the fiscal years.
|Fiscal Year||RBI Transfer to Government|
|FY 2012-13||Rs33,110 crore|
|FY 2013-14||Rs52,679 crore|
|FY 2014-15||Rs65,896 crore|
|FY 2015-16||Rs65,876 crore|
|FY 2016-17||Rs30,659 crore|
|FY 2017-18||Rs50,000 crore|
|FY 2018-19||Rs176,051 crore|
|FY 2019-20||Rs57,128 crore|
|FY 2020-21||Rs99,122 crore|
|FY 2021-22||Rs30,307 crore|
|FY 2022-23||Rs87,416 crore|
Data Source: RBI
Let us first capture some of the highlights of the above table and why the RBI dividends to the central government have fluctuated over time.
In a sense, the recent dividend announcement is much better than expected and is likely to boost government revenues. Reports of a higher dividend transfer were already out in the last few days with markets pegging RBI dividends anywhere between Rs80,000 crore and Rs160,000 crore. The dividend eventually may have been less than what the market desired but surely more than what was originally budgeted.
How did RBI manage to pay such a hefty dividend to the government this year. There were several enabling factors.
A combination of domestic and global factors had allowed the RBI to end FY23 with a much bigger distributable surplus.
For the central government, it is a revenue boost, since the additional dividend payout by the RBI is nearly 0.2% of GDP. It should help the government on two fronts. Firstly, it is estimated that the RBI has honoured its commitment of 6.4% fiscal deficit in FY23. The Union Budget has set 5.9% fiscal deficit target for FY24, and this additional revenue pool should make that journey simpler.
Secondly, there have been apprehensions that India’s GDP growth may taper in FY24 due to a global slowdown and weak international trade. Year 2024 is an election year, so government would be cautious in disinvestments. This higher dividend payout gives room for the central government to sustain capex outlays and rural spending. That is surely encouraging!
Content Source: RBI