The Reserve Bank of India’s (RBI) decision to transfer a record surplus of nearly Rs 2.11 lakh crore to the Union government for 2023-24 provides a significant boost for the new administration as it prepares the Budget in July. This transfer, more than double the previous year’s Rs 87,416 crore payout and surpassing the Rs 1.02 lakh crore projected in the interim Union Budget for 2024-25, offers the incoming Finance Minister considerable flexibility in fiscal planning and expenditure. The substantial surplus reflects the RBI’s prudent asset management amid global uncertainty and widespread policy tightening by central banks striving to restore price stability.
The specifics of the RBI’s 2023-24 balance sheet will soon be revealed, but it is evident that higher interest income from overseas securities and gains from foreign exchange market interventions to mitigate rupee volatility contributed significantly to this surplus. As of March 29, total foreign exchange reserves had surged by $67.1 billion over 12 months, reaching $645.58 billion. Additionally, the RBI has demonstrated prudence in provisioning under the Contingent Risk Buffer (CRB), raising it by 50 basis points to 6.5% of its balance sheet size for 2023-24.
This move underscores the central bank’s confidence in the domestic economy’s health and its commitment to shielding it from unexpected global financial threats. For the new government, taking office after the general election results on June 4, this substantial transfer offers a unique opportunity to boost capital spending at a time when private consumption expenditure is struggling to gain momentum. Moreover, utilizing part of this surplus to bridge the fiscal gap can strengthen government finances and reassure investors of its dedication to fiscal consolidation. In its quiet yet impactful manner, the RBI has paved the way for the new government to embark on its journey with confidence in the economy’s resilience. This record transfer not only bolsters the government’s fiscal position but also sets a positive tone for economic stability and growth.
