State Bank of India (SBI) group chief economic adviser Soumya Kanti Ghosh has said that the Reserve Bank of India's payout of Rs 1.76 lakh crore "will hold the economy in a good state", and will help the government maintain its fiscal deficit goal with no additional borrowings. Comments from the top SBI official come a day after the RBI's Central Board approved a transfer of Rs 1.76 lakh crore to the government from its surplus and reserves, as it accepted the recommendations made by an expert committee headed by former RBI Governor Bimal Jalan.
The RBI has made it clear the transfer has been done from its retained earnings unlike the earlier demand by the government to transfer funds from its unrealised gains, he said, adding that it is a "very conscious decision", and "holds well" for the central bank.
The transfer of surplus and excess dividend is in line with the recommendations of the Bimal Jalan Committee, which was tasked to review the Economic Capital Framework of the RBI. The record transfer by the RBI to the government includes a surplus of Rs. 1.23 lakh crore for 2018-19.
The RBI pays dividends to the government every year, based on the profits from its investments and printing of notes and coins. It will release its balance sheet as part of its annual report later this week.
With government revenues not looking encouraging and in conjuncture with the RBI's accommodative stance, the transfer will help the government maintain its fiscal deficit target of 3.3 per cent of GDP with no additional borrowings, Mr Ghosh added.
The government in July this year revised its fiscal deficit target to 3.3 per cent from 3.4 per cent previously, surprising many economists who had expected a relaxation in the goal.
Last week, Finance Minister Nirmala Sitharaman announced a range of measures, including an immediate injection of Rs. 70,000 crore into state-run banks, to shore up growth.
India's GDP or gross domestic product grew 5.8 per cent in the quarter ended March 31. For the full financial year 2018-19, economic growth came in at 6.8 per cent, the lowest in nearly five years.
The government is due to release GDP data for the first quarter of financial year 2019-20.
"All in all it is a good move and in conjunction with the RBI's accommodative monetary policy... I think this will hold the economy in a good state when the growth has been slow," Mr Ghosh added.
According to a poll by news agency Reuters, the economic growth is expected to have slowed to a more than five-year low of 5.7 per cent in the June quarter.
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