India's banking regulator the Reserve Bank of India (RBI) on Friday approved an annual dividend worth $7.6 billion to the central government. At a time when the government needs resources to be deployed in the fight against COVID-19, the amount of the dividend is at least $400 million less than New Delhi's expectations.
The decision was made at a meeting of the Central Board of the RBI under the chairmanship of Governor Shaktikanta Das.
“The Board approved the transfer of $7.6 Billion as surplus to the central government for the accounting year 2019-20”, the RBI said in an official statement after the meeting.
“The Board reviewed the current economic situation, continued global and domestic challenges and the monetary, regulatory and other measures taken by RBI to mitigate the economic impact of COVID-19 pandemic”, the statement added.
Sources in the Indian Ministry of Finance, meanwhile, pointed out that the amount of dividend this year is short of the government expectations.
“The government had budgeted for dividend worth about $8 billion from the RBI in the budget in February this year. The approved amount is $400 million short from the budgeted amount. In February, when the country’s annual budget was prepared no one had accounted for the spending due to the pandemic”.
In order to tackle the challenges posed by the pandemic, the Indian government rolled out an economic stimulus package to the tune of $266 billion in May this year. Over and above that, the RBI too has been injecting liquidity to keep the financial system afloat in the wake of the pandemic. The banking regulator has injected $127 billion into the country's financial system since February this year.
The government data has revealed that a large part of the spending accounted for the entire year was provided in April – June, owing to COVID-19.
India's fiscal deficit (the difference between total income and total expenditure) in the first three months of the current financial year (April - June) stood at $88.26 billion. This is 83.2% of the budgeted target for the current fiscal year (April 2020 - March 2021).