look news india
Mumbai: Various rating agencies believe that India's sovereign rating will depend on how the new government at the Center uses the huge dividend provided to the government by the Reserve Bank. The dividend of Rs 2.11 lakh crore given by the Reserve Bank of India to the government is expected to have a limited impact on fiscal discipline in the medium term. According to a report by rating agency Fitch, the positive impact on India's rating will be seen only when the deficit is reduced steadily.
A sustained reduction in the deficit through strong revenue-raising measures could be positive for improving the country's rating. The government has set a target of reducing the fiscal deficit to 4.50 percent of GDP by 2026. The interim budget for the current fiscal year has set the deficit target at 5.10 percent of GDP. A higher-than-expected dividend will force the government to reduce borrowing in the current fiscal year, which will help reduce the deficit, an analyst said.
The analyst also said that the government was expecting a revenue of Rs 1 lakh crore through dividends, but a higher than expected amount will give the new government scope to increase capital expenditure in the current financial year.
On the other hand, Moody's Ratings said the fiscal impact also largely depends on what the new government does with the higher dividend income.
The additional dividend paid by the Reserve Bank to the government is 0.35 per cent of GDP. If the government uses this additional income to reduce the fiscal deficit, it will help raise the sovereign rating, S&P Global said on Thursday. For the financial year ended 2023-24, the Reserve Bank of India will pay a dividend of Rs 2.11 lakh crore. The central government had decided to give Rs crore in its board meeting. The dividend for the financial year 2023-24 is 140 per cent higher than the financial year 2022-23.
