The Reserve Bank of India (RBI) on Friday approved a dividend payout of Rs 57,000 crore to the government for the current financial year. The development comes at a time when the government’s fiscal deficit hit a record Rs 6.62 lakh crore in the April-June period as the coronavirus pandemic-triggered lockdown affected government’s revenue collections. Fiscal deficit – an indication of the total borrowings required by a government – occurs when revenue collections fall short of expenditure.
The government had budgeted a dividend of Rs 60,000 crore from the central bank and other state-run financial institutions.
As the manager of government finances, the central bank pays the government a dividend each year to help the government meet its financial targets.
The receipt from various sources – including dividend from the central bank – helps government meet its fiscal deficit target.
The government has pegged fiscal deficit at 3.8 per cent of the country’s gross domestic product (GDP) in the year ending March 2021, as against 3.3 per cent for financial year 2019-20.
COVID-19-affected tax collections and with the front-loading of spending by the government, fiscal deficit is gap likely to widen the gap, according to economists.
The country’s economy is forecast to shrink 5.1 per cent in the current fiscal year, and 9.1 per cent under a worst-case scenario, according to analysts in a poll by news agency Reuters.
If true, that will mark the country’s worst economic performance since 1979.
