RBI bonanza to help government meet FY20 deficit target

NEW DELHI: The massive transfer of Rs 1.76 lakh crore from the RBI to the government has come as a huge relief for the Centre, which has been grappling with a tight revenue position. The transfer from the RBI is also expected to act as a stimulus for the economy, which has shown significant signs of a slowdown. The government unveiled a raft of measures last week and, along with this transfer, it is expected that the policymakers have enough ammunition to tackle the slowdown. But economists urged caution. "It is a great opportunity for policymakers to use the money judiciously in reviving the sagging economy and also to clean up the deferred payments. There are many things which are off-Budget," said N R Bhanumurthy, professor at the National Institute of Public Finance and Policy. The sluggish receipts from the GST and overall revenue situation along with a slowdown in consumption had triggered worries over the government's ability to meet the fiscal deficit target for the current year, which has been estimated at 3.3% of GDP. The government had budgeted Rs 90,000 crore as dividend from the central bank, but the additional funds which were finalised after the Bimal Jalan committee recommendations have come as a bonanza for the cash-strapped government. The government has been arguing for a larger transfer from the central bank as the owner of the RBI, which is a nationalised entity. Aditi Nayar, principal economist at ratings agency ICRA, said the payout from the central bank will help the government meet the deficit target comfortably. The Centre has been reiterating its commitment to fiscal consolidation against the backdrop of its social sector spending commitments and sluggish revenues. "The transfer of surplus from the RBI should help to offset the expected shortfalls in various tax revenues in fiscal year 2020 and aid the government in meeting it's fiscal deficit target. As a result, government securities yields are likely to ease in the immediate term," said the economist.