TODAY -

Cut deficit, boom likely

Shivaji Sarkar *



A staggering windfall has hit the Indian treasury as the Reserve Bank of India delivers its largest-ever dividend of Rs 2.11 lakh crore. This colossal sum, a whopping 141 percentsurge from last year’s Rs 87,416 crore, has not only strengthened government finances but also set the stock market abuzz with wild speculation.

The RBI says the amount includes dividends from the public sector banks and other undertakings. The share market bounces BSE Sensex to an all-time high of 75,500 as the benchmark. Nifty similarly spurred to a high of 22,994. The perky share market, however, is no indication of a booming economy. Though it might shower bonanza on many players before the last two phases of the Lok Sabha elections.

Quite a few days back the bond market has been buzzing with certain movements. Soon after the dividend announcements government bonds slipped below 7 percent suggesting that the investors are at quick money in the stock market and government borrowings no longer remain lucrative.

The previous highest transfer was in 2018-19 of Rs 1.76 lakh crore. Some of the former RBI governors then were critical of the extravaganza as they suspected to have delved into the reserves that are used to keep the banking sector in good health.

This time too the 2024-25 budget had estimated a dividend of Rs 1.02 lakh crore. Nobody had speculated that it could be more than double of that. A pertinent question is what would the government do with this bonanza as the interim budget has taken care of most of the expenses the government is supposed to do during the year, including repayment of Rs 10 lakh crore plus debt.

The boom has enthused the share market as foreign portfolio investors withdrew a net amount of Rs 28,200 crore in equities in 2024 so far reportedly in a keenly-contested election. The FPIs withdrew Rs 17.000 crore in May alone. However, they invested Rs 45,000 crore in the debt market. So would they now transfer their debt investments into equities and have fluffy profits!

Some of the domestic firms that got a boost are no surprises as they were having profits. The record dividend is expected to help the government bring down its fiscal deficit to 5 percent of GDP from the budgeted 5.1 percent.

The government is on a spending spree of Rs 11 lakh crore on infrastructure. The likelihood of ramping up Centre’s revenue expenditure growth remains limited. Post-election, there would be less pressure to fund subsidies and revenue expenditures.

S&P Global Rating analyst says that India can get ‘rating support’ over time if it utilises the highest-ever dividend to reduce fiscal deficit. There are apprehensions that if the extra money that would reflect in the July budget is utilised to spend more it could add to inflation. Already inflationary pressure remains high despite a small slide in the consumer index recently.

The government might resort to more crash measures by the new government. The RBI has repeatedly said that it was under pressure to maintain the price line but the constant rise has prevented it from doing a lot many things. As the level of prices are very high it should have reined in with suitable rise in interest rates. That has not happened.

The RBI funding at this level is likely to create additional liquidity. At the time of demonetisation, in 2016, around Rs 15 lakh crore of currency notes were in circulation. Now, according to RBI, the currency in circulation has more than doubled to Rs 35.15 lakh crore by the end March 2024. It denotes that higher level of money circulation is at least one of the reasons for the rising of prices.

In addition, there is circulation of digital or UPI money. This also inflates the market though so far actual demand has not risen much and manufacturing has shown marginal increase.

India's industrial production growth slowed marginally to 4.9 per cent month-on-month in March 2024, mainly due to poor show by the mining sector, according to official data. The factory output growth, measured in terms of the Index of Industrial Production (IIP), was 5.6 per cent in February 2024.

It means the kind of actual money is not being generated suppressing the job market. In a situation like this, how does RBI generate such a surplus, that even on May 20, two days before the announcement of the windfall, suggested the dividend would not be that high.

The RBI attributes the windfall to a confluence of factors including a surge in foreign exchange reserves, loans to commercial banks and the government's proactive approach in managing contingencies. Potential sources of higher profits for the RBI include gross spot sale of foreign exchange reserves and higher interest income in the US market.

One of its methods was to buy dollars at Rs 78 and sell at Rs 83. With gross sales exceeding $150 billion in 2023-24, a significant portion of the dividend can be explained by these transactions, which were primarily carried out to generate the payout amount.

Somewhere the citizens paid the difference. It is noted that the RBI could have transferred an additional Rs 35,000 crore in dividends if it had not increased the contingency buffer around 6 percent. However, a former chairman of the 5th West Bengal State Finance Commission, Abhirup Sarkar, and a former professor at the Indian Statistical Institute, expresses reservations.

He says that the payment might not be from its income and the central bank could have used its reserves to pay the hefty dividend. He cautioned against the inflationary impact of injecting liquidity into the market, foreseeing a decline in real interest rates that could adversely affect retirees and individuals reliant on interest income.

The timing of the announcement amid the elections also has raised some questions. The bond markets would like the government to reduce its deficits. On the contrary, the equities prefer government increase expenses. Both have different purposes. But the country wants the banks, which have gone through phases of turmoil, to consolidate and add to the growth.


* Shivaji Sarkar wrote this article for The Sangai Express
This article was webcasted on 30 May 2024

* Comments posted by users in this discussion thread and other parts of this site are opinions of the individuals posting them (whose user ID is displayed alongside) and not the views of e-pao.net. We strongly recommend that users exercise responsibility, sensitivity and caution over language while writing your opinions which will be seen and read by other users. Please read a complete Guideline on using comments on this website.




LATEST IN E-PAO.NET
  • Scientist of Manipur: R K Brojen Singh
  • Violence in Manipur 2023-2024 : Timeline
  • Brief sketch on General Balaram Sougaijamba
  • Non-violent for peaceful, mutual co-existence
  • Homeless person ..alcoholism & defeated TB
  • Cancer on rise among young adults
  • Defending, fighting for Idea of Manipur
  • From partiality to complicity
  • Bike Rally - Sekmai to Kangla : Gallery
  • 'Modi must announce finality of Naga pacts'
  • Gliding over Brahmaputra
  • Question leaks cause stress among student
  • Home remedies for prickly heat
  • After IIT, AIIMS it is now IIM
  • Stealing spotlight from Manipur crisis
  • Tarpon chaklen katpa @ Andro #2 : Gallery
  • Strongly condemns violence in Jiribam
  • Lessons from outcome of LS election
  • Tumcho releases "Goodness of God"
  • Right diagnostic for antimicrobial resistance
  • 12th June is World Day against Child Labour
  • Hands of geo-politics ?
  • The row over NEET-2014
  • 2nd Annual Art Exhibition #1 : Gallery
  • Chilli Chicken: Film Spotlighting NE in B'lore
  • Committee of Narcotics Anonymous - Imphal
  • The Power of Meditation
  • Oceans as a career choice
  • Getting more and more audacious
  • A test of leadership
  • Education Fair @Imphal #2 : Gallery
  • Gifting two seats to Cong
  • Voters empowered democracy
  • Postcards from Meghalaya premieres
  • Milk : Essential nutrient for a healthy body
  • Failing in competitive exam not end of world
  • Delhi : A mere spectator
  • Abandoning Jiribam
  • Birth Centenary of Jananeta Irabat, 1996 : #5
  • Ima Keithel flood- May 30 #2 : Gallery
  • Mainstream in Shoes of Alternative
  • Protect the medicines that protect us
  • Lets take action for our land & our future
  • Democracy and independent media
  • Agenda at work to shut Western Gate
  • Keeping Manipur on the boil
  • Descent of Radha-Krishna #34: Download
  • The Enigmatic Journey of 'Laikhutshangbi'
  • Individual and the Social
  • An Ardent Appeal to All Concerns
  • Condemnation of Attack & Govt Inaction
  • The Power of Poppy - 34 :: Poem
  • Scientist of Manipur: Laishram Shanta
  • Alien fishes spotted in Manipur's rivers
  • Training on mushroom at Langthabal
  • Digital avatars or deepfakes ?
  • 7th June is the World Food Safety Day
  • How to prepare for UPSC after 10th ?
  • The Jiri violence
  • Beginning of a new vote culture ?
  • Bimol Akoijam (Cong) wins Inner PC : Gallery
  • BJP, NPF & other NDA pay heavy price
  • Nature is one of greatest blessings of God
  • Plantation drive in Tripura, Assam & Manipur
  • Summer beauty
  • Environment conservation & over-exploitation
  • Is Modi cut out for leading a coalition ?
  • 'Ishanou' Selection @ Cannes #2: Gallery
  • Scholarship for Johnstone Hr Sec students
  • 1st foundation day of Interfaith Forum
  • World Environment Day: Our land, our future
  • Indonesia stronger anti-tobacco measures
  • Navigating a fragile Myanmar: India's policy
  • New breed entering electoral politics
  • The road to formation of new govt
  • International Dance Day #1 : Gallery
  • Matchbox marketing mantra
  • Stop harming nature :: Poem
  • Saving for oneself & the Nation
  • Model United Nations (MUN) conducted
  • Tobacco: Threat to health & environment
  • Candidate from ruling party biting the dust
  • The verdict
  • Birth Centenary of Jananeta Irabat, 1996 : #4
  • Imphal valley districts flooded #3 : Gallery
  • Navigating Remal amidst Manipur conflict
  • We are #GenerationRestoration
  • Intl Day of Innocent Children Victims
  • Apparel Industry Skills & Innovation CoE
  • What's in a cyclone's name ?
  • Ongoing clash, the floods, the losses
  • Exit poll predictions
  • Descent of Radha-Krishna #33: Download
  • Evading flood & rethinking urbanization
  • Manipur Flood: Health Advisory
  • Onus on civil bodies to ensure NNPG unity
  • Rats also cause flood
  • Benefits of JEE Main mock tests
  • People have spoken, now the results
  • The fury of Remal
  • Ima Keithel flood- May 30 #1 : Gallery
  • The flood in our Stars
  • The Power of Poppy - 33 :: Poem
  • 'Group of people misrepresented themselves'
  • EV industry and career options
  • Scientist of Manipur: Chandrakant Aribam
  • Candy flavoured traps to hook next Gen
  • Commemorate Naga Plesbicite Day 1951 #2
  • Tobacco affects health & environment too
  • Jio extend validity for Customer in Manipur
  • Students must learn about AI irrespective
  • As vote count day approaches : Floods
  • Imphal valley districts flooded #2 : Gallery
  • Flooded : Sacrifice of Yairipok's Maiden
  • World No Tobacco Day 2024
  • Chandam Rishikanta wins NPC Nat'l C'ship
  • Flood: Helpline numbers for emergency
  • Battling body odour ?
  • Floods : Not entirely natural phenomena
  • PM Modi's purpose
  • Imphal valley districts flooded #1 : Gallery
  • June Calendar for Year 2024 : Tools
  • Flood: Control Rooms & Helpline numbers
  • Economic impact of ongoing conflict
  • Army Recruitment Rally for Manipur
  • Cut deficit, boom likely
  • Are Gods angry ? Wake up call for Manipur
  • Beating of the Retreat #2 : Gallery
  • We did Overcome: Mayhem of Month of May
  • Training on mushroom at Potshagbam
  • Famous female Mathematicians in India
  • Disinformation campaign thengnare
  • Human trafficking puts humanity to shame
  • Sky opens up in all its fury
  • Licypriya meets Italy PM & Pope Francis
  • HSLC (Class X) 2024 : Full Result
  • HSLC 2024 : Important Info & Grading System
  • HSLC 2024 : Pass % : Private Schools
  • HSLC 2024 : Pass % : Aided Schools
  • HSLC 2024 : Pass % : Govt Schools
  • HSLC 2024 : Statistical Abstract
  • HSLC 2024 : Comparative Statement
  • Combined Defence Services Exam 2024
  • Good show in Class X exams
  • Downplaying the crisis
  • Birth Centenary of Jananeta Irabat, 1996 : #3
  • Reviving Lamphelpat : Conservation : Gallery
  • Commemorate Naga Plesbicite Day 1951 #1
  • "ST status for Meetei" at Hojai
  • The Power of Poppy - 32 :: Poem
  • Insights from CUET-UG Counselling
  • International Day for Biological Diversity
  • Unseen force at work: Time to unravel it
  • Sheikh Hasina's revelation
  • The Vanishing Meitei Tribe
  • Building career in defence & strategic study
  • Why example of model code of conduct ?
  • Ownership of responsibility
  • Will pressure mount on key players in NE
  • How to save your foot after an accident
  • Children Camp @JNMDA Imphal #3 : Gallery
  • Education Fair @Imphal #1 : Gallery
  • Project Associate @ CSE, Assam Univ
  • Understanding schizophrenia
  • Advancement in Multi Objective Optimization
  • When will women in voter list increase ?
  • Making 2 plus 2 is equal to 5
  • Changing face of drug menace
  • Scientist of Manipur: Jayanta Manoharmayum
  • 25 yrs since Atal Vajpayee visit to RIMS
  • 4 Lakhs donated to support (L) Maipak Family
  • Clarification: Guwahati Meet on Humanitarian
  • Start UPSC prep after 12th for success
  • Tips to avoid melting makeup in summer
  • Giving a big solid push to ST demand
  • Time to come clean
  • Sajibu Cheiraoba: 1 occasion, 2 narratives #3
  • Khongjom Day @Khebaching #2 : Gallery
  • A year of hostilities
  • Licypriya Kangujam to travel to Italy
  • Declining moral standards in public life
  • Healthy democracy with independent media
  • Why endangered species matter to us
  • Significant Guwahati meeting : 1st visible step
  • The Pallel story
  • Aftermath of ferocious hailstorm #2 : Gallery
  • Ukhrul: Climate change grip on water supply
  • Commemoration of World Eld's Deer Day
  • Indo-Naga Talks (From 2012) :: Timeline
  • "ST status for Meetei" at Hiyanglam
  • Dance of democracy, a miracle in making !
  • Learn to look 10/20/30 years hence
  • The zero FIR, zero lesson
  • 'Ishanou' Selection @ Cannes #1: Gallery
  • MOU signed: MTI-HUB & KIIT-TBI & SAbF
  • Lament of the Mourning Choir :: Poem
  • "ST status for Meetei" at Wabagai
  • RSS-BJP fracas
  • Trials for Canoe Slalom World Cup
  • Poser from a villager says it all Kamjong
  • The cover-up effort
  • Birth Centenary of Jananeta Irabat, 1996 : #2
  • Manipuri women in the arena of politics
  • "ST status for Meetei" at Assam
  • Aimee Baruah at red carpet of Cannes
  • National Defence Academy Exam 2024
  • How digital media changed communications
  • Manipur stands scandalised
  • All eyes on UP battle
  • Descent of Radha-Krishna #32: Download
  • Riots to a shrine- Ram Mandir of Ayodhya
  • Handle with care. F.R.I.E.N.D.S inside!
  • The Power of Poppy - 31 :: Poem
  • Celebrate the journey !
  • Career counselling : A life guidance tool
  • Scientist of Manipur: Amom Ruhikanta
  • Preserving Thang-Ta :: Rare Photos
  • Regarding Human Rights Situation in Manipur
  • Malemnganbi Laishram : Science Topper
  • Featured Front Page Photo 2024 #2: Gallery
  • Thokchom Sheityajit : Arts Topper
  • Aiena Naorem : Commerce Topper
  • AISSE 2024 Exam Result- RKM Imphal
  • Gold, new world currency !
  • Milk for hair and skin
  • Of illegal immigrants & the larger picture
  • The missive from Kamjong
  • Hr Secondary Exam 2024 : Science Topper
  • HSE 2024 : Subject Pass Percentage
  • HSE 2024 : District Pass Percentage
  • HSE 2024 : Candidates with Highest Marks
  • Hr Secondary Exam 2024: Science Full Result
  • Hr Secondary Exam 2024: Arts Full Result
  • Hr Secondary Exam 2024: Commerce Result
  • Hr Secondary Exam 2024 : Arts Topper
  • Hr Secondary Exam 2024 : Commerce Topper
  • World Bamboo Congress @Taiwan : Gallery
  • Aftermath of ferocious hailstorm #1 : Gallery
  • Radio E-pao: Manipuri Film OST (130+ song)
  • Cheirao-chingkaba @ Chinga : Gallery
  • Nupi Landa Thaunaphabishing : Full Book
  • A ferocious hailstorm @Imphal : Gallery
  • '365 Days of Chin-Kuki Aggression' : Gallery
  • Athoubasingi Numit #2 : Gallery
  • National Science Teacher workshop
  • Sajibu Cheiraoba Chak Katpa #2 : Gallery
  • Scientists of Manipur : Ngangkham Nimai
  • Kenedy Khuman (Singer) : Gallery
  • GHOST of PEACE :: Download Booklet
  • List of Kings of Manipur: 33 - 1984 AD