This year, the amount that the Reserve Bank of India (RBI) will pay as dividend to the Central government has shrunk to half, compared to the year before's kitty - burning a deep hole in the State exchequer. RBI had in 2014-15 paid Rs. 65,896 crore dividend and Rs. 52,679 crore in the year prior to that.
Since 2012-13, following the YH Malegam Committee's recommendations, the RBI has been transferring its entire surplus to the government. RBI transferred about 80% of its income as surplus in the previous three years.
The Reserve Bank has halved its dividend payout to the government to Rs 30,659 crore for the fiscal ended June 2017, which analysts attributed to increased printing cost of new currency notes post demonetisation, among other reasons.
The decline could make it harder for the government to meet its fiscal deficit target of 3.2 percent of gross domestic product for the year ending in March, although New Delhi will likely meet the shortfall by boosting revenues from other areas. A year later, the central Bank paid Rs 65, 896 crore to the government, which helped it in covering the deficit.
Due to increased liquidity in the system, the RBI has been borrowing money under reverse repo and paying interest which has implications on the revenue, he added. "If other conditions remain unchanged, the fiscal deficit can increase to 3.4 per cent from 3.2 per cent previous year", says Madan Sabnavis, Chief Economist at CARE Ratings (India). "I think one reason is the cost of seigniorage, - which is higher the more the RBI printed notes".
It might be recalled RBI is yet divulge the finer aspects of its currency demonetisation drive launched on 8 November, 2016. "Will RBI also tell us the cost of destroying old notes and the cost of printing new/replacement notes?" he said in another tweet.
Direct tax collection has registered a steady growth of 19.1 per cent in the first four months of the current fiscal to Rs 1.90 lakh crore.