RBI payout positive for fiscal metrics

Global rating agencies on Friday said windfall of Rs2.1 lakh crore dividend from the RBI is positive for India’s fiscal metrics and its usage will provide a signal around the new government’s fiscal priorities.

The board of India’s central bank earlier this week decided to pay Rs2.1 lakh crore dividend to the government from the profits earned in 2023-24. This is more than double of Rs1.02 lakh crore that was budgeted by the government. Fitch Ratings Asia-Pacific Sovereigns Director Jeremy Zook said sustained deficit reduction, particularly if underpinned by durable revenue-raising reforms, would be positive for India’s rating fundamentals over the medium-term.

“The use of the dividend - whether it is saved or used for additional spending - could provide a signal around the government’s fiscal priorities,” said Zook. Fitch has a ‘BBB-’ rating on India with a stable outlook. In January, the rating agency had affirmed India’s rating on robust growth outlook, but had said that weak public finances continue to constraint the rating.