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Business Standard
a day ago
- Business
- Business Standard
Govt outperforms on fiscal deficit, brings it down to 4.77% of GDP in FY25
The government has marginally improved its fiscal deficit for 2024-25 (FY25), bringing it down to 4.77 per cent over the revised estimate (RE) of 4.84 per cent, according to the data released by the Controller General of Accounts (CGA) on Friday. With the provisional estimate of gross domestic product (GDP) FY25 of ₹330.68 trillion, showing an improvement over the RE of ₹324.11 trillion, the fiscal deficit calculated as percentage of GDP has come down. 'The government's fiscal deficit marginally exceeded the RE for FY25 by ₹77 billion, albeit led by a welcome overshooting in capital expenditure amid a less palatable miss on receipts being largely offset by considerable savings of ₹90,000 crore in revenue expenditure,' said Aditi Nayar, chief economist, Icra. Capital expenditure for FY25, at ₹10.5 trillion, stood at 103.3 per cent of the RE for the year, the CGA data showed. In line with its commitment to narrow the fiscal deficit to 4.5 per cent by FY26, the government had set the fiscal deficit target for this financial year at 4.4 per cent. Experts say the upward revision in the FY25 nominal GDP number augurs well for meeting the deficit and debt for FY26. The bumper dividend of ₹2.69 trillion announced by the Reserve Bank of India (RBI) is expected to ease the fiscal situation and help bring down the fiscal deficit in FY26 even further. The Union Budget for 2025-26 has projected a dividend income of ₹2.56 trillion from the RBI and public-sector financial institutions. 'India's medium-term growth prospects appear to be robust with sound fiscal management. Emphasis on government capital expenditure appears to be leading the growth story from the policy side, with healthy supporting growth in private final consumption expenditure,' said D K Srivastava, chief policy advisor, EY India. Net tax revenue, according to the CGA data, fell short of the RE at ₹24.99 trillion -- at 97.7 per cent. Non-tax receipts, however, overshot the RE at 101.2 per cent at ₹5.8 trillion. Union Finance Minister Nirmala Sitharaman in her FY26 Budget announced a new glide path with the debt-to-GDP ratio as the fiscal anchor, moving away from the current practice of targeting fiscal deficit. The government now targets bringing down the debt-to-GDP ratio to 50 per cent by FY31 with a one percentage point deviation on either side.
India Gazette
3 days ago
- Business
- India Gazette
Increased capex, focus on rare earth minerals may shape India's 'Viksit Bharat' journey: EY report
New Delhi [India], May 28 (ANI): An increased capital expenditure and focus on rare earth minerals may shape India's Viksit Bharat journey, according to a report by EY. It suggested that policy measures must balance consumption support with increased capital expenditure. Also, India's long-term growth relies on building resilience through self-reliance in critical minerals. Critical minerals are those minerals that are essential for economic development and national security. In June 2023, India has identified at least 30 critical minerals taking into account its requirements for sectors like defence, agriculture, energy, pharmaceutical, and telecom. India has launched a National Critical Mineral Mission in 2025 to address this, but further support from both the public and private sectors will be important, EY said. Strengthening partnerships with countries rich in rare earth resources could also help reduce supply chain risks. According to the EY Economy Watch May edition, India's economic growth for 2025-26 is expected to moderate, influenced by a mix of global and domestic developments. Yet, the EY report said India remains one of the fastest-growing major economies, supported by resilient domestic demand, easing inflation, and an accommodative monetary policy linked to prospects of revival in private investment. As per EY report analysis, global factors are largely contributing to a cautious outlook. These include continuing supply chain disruptions, the impact of recent tariff measures by the US, and broader uncertainties in global trade and geopolitical developments. EY report suggests that in the near term, India may need to rely on a balanced mix of monetary and fiscal policies for sustaining the growth momentum. On the monetary front, a continuation of the ongoing rate cut cycle could provide support to consumption and investment. On the fiscal side, reviving the momentum in public investment especially the government's capital expenditure, which witnessed a moderation in growth in 2024-25, will be important to sustain economic activity. DK Srivastava, Chief Policy Advisor, EY India said, 'While India's medium-term prospects remain strong, current global headwinds and domestic challenges call for supportive fiscal and monetary policies. Over the long run, sectors linked to technology and clean energy will play a key role in driving sustainable growth. Building resilience through self-reliance in critical minerals, especially in rare earths, can help India move closer to its Viksit Bharat aspirations.' (ANI)
Economic Times
5 days ago
- Business
- Economic Times
RBI's ₹2.7 lakh cr dividend fuelled by dollar gains, interest income, analysts say
Substantial gains from US dollar sales and interest income from securities prompted the Reserve Bank to announce a record Rs 2.7 lakh crore annual dividend to the central government, according to analysts. The Reserve Bank on Friday announced a record Rs 2.69 lakh crore dividend to the government for FY25, helping the exchequer to tide over challenges posed by US tariffs and increased spending on defence due to the conflict with Pakistan. The decision on the dividend payout was taken at the 616th meeting of the Central Board of Directors of Reserve Bank of India held here under the Chairmanship of Governor Sanjay Malhotra. The central bank has transferred Rs 2.1 lakh crore dividend to the government for the fiscal 2023-24. The payout was Rs 87,416 crore for 2022-23. DK Srivastava, Chief Policy Advisor, EY India, said the RBI has been making higher and higher surplus transfers to the government after the Covid year of 2021-22. "This transfer is in spite of the RBI raising the Contingent Risk Buffer to 7.5 per cent for 2024-25 from its previous level of 6.5 per cent for 2023-24. The main reason for RBI's increased income relates to its foreign exchange operations, which included the selling of large amounts of USD and higher interest income," Srivastava said. In a report, CareEdge said though the RBI dividend is higher compared to the previous year, it has come below the market expectations centred around higher than Rs 3 lakh crore. Increased risk provisioning under the revised Economic Capital Framework (ECF) reined in the dividend at Rs 2.7 lakh crore, it said. "With the RBI yet to release its annual report, the reasons behind the higher surplus reported for FY25 are still awaited. However, we expect that the substantial gains incurred from dollar sales throughout the year may have been the key contributing factor for this record dividend transfer," CareEdge said. Furthermore, other factors like the interest income from rupee securities and foreign securities could have also underpinned the higher dividend amount to some extent, it added. Economists at SBI, in a report, said the Reserve Bank's bumper dividend will ease the fiscal position of the government and help bolster growth in the world's fourth-largest economy. Finance Minister Nirmala Sitharaman in her Budget for 2025-26 projected a dividend income of Rs 2.56 lakh crore cumulatively from the RBI and public sector financial institutions. With the RBI's transfer, this number would now be much higher than the budgeted estimates. "We expect the fiscal deficit to ease by 20 basis points from the budgeted level to 4.2 per cent of GDP. Alternatively, it will open up for additional spending for around Rs 70,000 crore, other things remaining unchanged," according to the latest edition of SBI Research's Ecowrap. In a report, Emkay Global Financial Services said the lower-than-expected surplus transfer appears to be largely on account of the RBI revising the risk provisioning range under the Contingent Risk Buffer (CRB). "As of now, we do not expect Centre's fiscal math to change drastically because of this. The incremental gain from the higher RBI dividend is expected to partly offset potential shortfalls in tax revenues and lower-than-expected nominal GDP growth. Accordingly, we maintain our FY26 gross FD/GDP target at 4.4 per cent, in line with the budget estimate," it said. On Friday, the central bank said the transferable surplus for the year (2024-25) has been arrived at on the basis of the revised ECF, which stipulates that the risk provisioning under the CRB be maintained within a range of 7.50 to 4.50 per cent of the RBI's balance sheet. During accounting years 2018-19 to 2021-22, owing to the prevailing macroeconomic conditions and the onslaught of the Covid-19 pandemic, the Central Board of Directors of the Reserve Bank of India decided to maintain the CRB at 5.50 per cent of the RBI's Balance Sheet size to support growth and overall economic activity. The CRB was increased to 6 per cent for FY 2022-23 and to 6.50 per cent for FY 2023-24. Based on the revised ECF, and taking into consideration the macroeconomic assessment, the Central Board decided to further increase the CRB to 7.50 per cent.
Time of India
5 days ago
- Business
- Time of India
RBI's ₹2.7 lakh cr dividend fuelled by dollar gains, interest income, analysts say
Substantial gains from US dollar sales and interest income from securities prompted the Reserve Bank to announce a record Rs 2.7 lakh crore annual dividend to the central government, according to analysts. The Reserve Bank on Friday announced a record Rs 2.69 lakh crore dividend to the government for FY25, helping the exchequer to tide over challenges posed by US tariffs and increased spending on defence due to the conflict with Pakistan. The decision on the dividend payout was taken at the 616th meeting of the Central Board of Directors of Reserve Bank of India held here under the Chairmanship of Governor Sanjay Malhotra. The central bank has transferred Rs 2.1 lakh crore dividend to the government for the fiscal 2023-24. The payout was Rs 87,416 crore for 2022-23. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Transform Your Child's Confidence with Our Public Speaking Program Planet Spark Book Now Undo DK Srivastava, Chief Policy Advisor, EY India, said the RBI has been making higher and higher surplus transfers to the government after the Covid year of 2021-22. "This transfer is in spite of the RBI raising the Contingent Risk Buffer to 7.5 per cent for 2024-25 from its previous level of 6.5 per cent for 2023-24. The main reason for RBI's increased income relates to its foreign exchange operations, which included the selling of large amounts of USD and higher interest income," Srivastava said. Live Events You Might Also Like: RBI declares 27% higher dividend on higher capital provision In a report, CareEdge said though the RBI dividend is higher compared to the previous year, it has come below the market expectations centred around higher than Rs 3 lakh crore. Increased risk provisioning under the revised Economic Capital Framework (ECF) reined in the dividend at Rs 2.7 lakh crore, it said. "With the RBI yet to release its annual report, the reasons behind the higher surplus reported for FY25 are still awaited. However, we expect that the substantial gains incurred from dollar sales throughout the year may have been the key contributing factor for this record dividend transfer," CareEdge said. Furthermore, other factors like the interest income from rupee securities and foreign securities could have also underpinned the higher dividend amount to some extent, it added. Economists at SBI, in a report, said the Reserve Bank's bumper dividend will ease the fiscal position of the government and help bolster growth in the world's fourth-largest economy. Finance Minister Nirmala Sitharaman in her Budget for 2025-26 projected a dividend income of Rs 2.56 lakh crore cumulatively from the RBI and public sector financial institutions. With the RBI's transfer, this number would now be much higher than the budgeted estimates. "We expect the fiscal deficit to ease by 20 basis points from the budgeted level to 4.2 per cent of GDP. Alternatively, it will open up for additional spending for around Rs 70,000 crore, other things remaining unchanged," according to the latest edition of SBI Research's Ecowrap. In a report, Emkay Global Financial Services said the lower-than-expected surplus transfer appears to be largely on account of the RBI revising the risk provisioning range under the Contingent Risk Buffer (CRB). "As of now, we do not expect Centre's fiscal math to change drastically because of this. The incremental gain from the higher RBI dividend is expected to partly offset potential shortfalls in tax revenues and lower-than-expected nominal GDP growth. Accordingly, we maintain our FY26 gross FD/GDP target at 4.4 per cent, in line with the budget estimate," it said. On Friday, the central bank said the transferable surplus for the year (2024-25) has been arrived at on the basis of the revised ECF, which stipulates that the risk provisioning under the CRB be maintained within a range of 7.50 to 4.50 per cent of the RBI's balance sheet. During accounting years 2018-19 to 2021-22, owing to the prevailing macroeconomic conditions and the onslaught of the Covid-19 pandemic, the Central Board of Directors of the Reserve Bank of India decided to maintain the CRB at 5.50 per cent of the RBI's Balance Sheet size to support growth and overall economic activity. The CRB was increased to 6 per cent for FY 2022-23 and to 6.50 per cent for FY 2023-24. Based on the revised ECF, and taking into consideration the macroeconomic assessment, the Central Board decided to further increase the CRB to 7.50 per cent.
Mint
5 days ago
- Business
- Mint
Gains from dollar sales, interest income key factors for higher RBI dividend to govt: Analysts
Mumbai, May 26 (PTI) Substantial gains from US dollar sales and interest income from securities prompted the Reserve Bank to announce a record ₹ 2.7 lakh crore annual dividend to the central government, according to analysts. The Reserve Bank on Friday announced a record ₹ 2.69 lakh crore dividend to the government for FY25, helping the exchequer to tide over challenges posed by US tariffs and increased spending on defence due to the conflict with Pakistan. The decision on the dividend payout was taken at the 616th meeting of the Central Board of Directors of Reserve Bank of India held here under the Chairmanship of Governor Sanjay Malhotra. The central bank has transferred ₹ 2.1 lakh crore dividend to the government for the fiscal 2023-24. The payout was ₹ 87,416 crore for 2022-23. DK Srivastava, Chief Policy Advisor, EY India, said the RBI has been making higher and higher surplus transfers to the government after the Covid year of 2021-22. "This transfer is in spite of the RBI raising the Contingent Risk Buffer to 7.5 per cent for 2024-25 from its previous level of 6.5 per cent for 2023-24. The main reason for RBI's increased income relates to its foreign exchange operations, which included the selling of large amounts of USD and higher interest income," Srivastava said. In a report, CareEdge said though the RBI dividend is higher compared to the previous year, it has come below the market expectations centred around higher than ₹ 3 lakh crore. Increased risk provisioning under the revised Economic Capital Framework (ECF) reined in the dividend at ₹ 2.7 lakh crore, it said. "With the RBI yet to release its annual report, the reasons behind the higher surplus reported for FY25 are still awaited. However, we expect that the substantial gains incurred from dollar sales throughout the year may have been the key contributing factor for this record dividend transfer," CareEdge said. Furthermore, other factors like the interest income from rupee securities and foreign securities could have also underpinned the higher dividend amount to some extent, it added. Economists at SBI, in a report, said the Reserve Bank's bumper dividend will ease the fiscal position of the government and help bolster growth in the world's fourth-largest economy. Finance Minister Nirmala Sitharaman in her Budget for 2025-26 projected a dividend income of ₹ 2.56 lakh crore cumulatively from the RBI and public sector financial institutions. With the RBI's transfer, this number would now be much higher than the budgeted estimates. "We expect the fiscal deficit to ease by 20 basis points from the budgeted level to 4.2 per cent of GDP. Alternatively, it will open up for additional spending for around ₹ 70,000 crore, other things remaining unchanged," according to the latest edition of SBI Research's Ecowrap. In a report, Emkay Global Financial Services said the lower-than-expected surplus transfer appears to be largely on account of the RBI revising the risk provisioning range under the Contingent Risk Buffer (CRB). "As of now, we do not expect Centre's fiscal math to change drastically because of this. The incremental gain from the higher RBI dividend is expected to partly offset potential shortfalls in tax revenues and lower-than-expected nominal GDP growth. Accordingly, we maintain our FY26 gross FD/GDP target at 4.4 per cent, in line with the budget estimate," it said. On Friday, the central bank said the transferable surplus for the year (2024-25) has been arrived at on the basis of the revised ECF, which stipulates that the risk provisioning under the CRB be maintained within a range of 7.50 to 4.50 per cent of the RBI's balance sheet. During accounting years 2018-19 to 2021-22, owing to the prevailing macroeconomic conditions and the onslaught of the Covid-19 pandemic, the Central Board of Directors of the Reserve Bank of India decided to maintain the CRB at 5.50 per cent of the RBI's Balance Sheet size to support growth and overall economic activity. The CRB was increased to 6 per cent for FY 2022-23 and to 6.50 per cent for FY 2023-24. Based on the revised ECF, and taking into consideration the macroeconomic assessment, the Central Board decided to further increase the CRB to 7.50 per cent.
