The central government has received a much needed financial boost from the Reserve Bank of India (RBI) as the apex bank has approved an early transfer of part of its profit. The transfer of dividend of Rs 28,000 crore is expected to help the centre meet its revised fiscal deficit target of 3.4 per cent of GDP for the fiscal year 2018-19. Notably, the RBI has already transferred Rs 40,000 crore in the current financial year.
After its board meeting on Monday evening, the RBI announced the dividend for the half year ended December 31, 2008. In total the centre has budgeted for Rs 74,140 crore in dividends from RBI and state-owned banks in the fiscal year ending 31 March.
For the next year, it has planned Rs 82,910 crore from the dividend. In an official statement, the RBI said: "Based on a limited audit review and after applying the extant economic capital framework, the board decided to transfer an interim surplus of Rs 28,000 crore to the central government for the half-year ended December 31, 2018."
The RBI also said that the surplus has been declared basis on the Economic Capital Framework and it will be adjusted against the final count.
The Modi-led government is desperate for funds to support its populist schemes at the onset of general elections. This is the second consecutive year that the central bank has approved an advanced payment to the government.
According to Mint, RBI has emulated Turkey's central bank that also had rescued its government before municipal elections. The municipal election is scheduled in March and is largely seen as a referendum on President Recep Tayyip Erdogan's rule by the political commentators.
After setting aside Rs 20,000 crore towards the first instalment of the $10.5 billion programmes, the government was in a desperate need of funds. In its Budget speech, acting Finance Minister Piyush Goyal had announced a direct income support Rs 6,000 per hectare which will be transferred directly into the farmers' bank accounts.
As per the scheme farmers, who own up to 2 hectares (5 acres) of land, will be given a direct income support Rs 2,000 every four months a year, which equals to Rs 6,000. The step is seen as the desperate measure by the government to reverse its fortune post its crushing defeat in the three state elections held in December 2018.