The record INR 2.1 lakh crore dividend payout to the central government from the Reserve Bank of India (RBI) has swelled government coffers. The utilisation of the bonanza amount is now the main concern. While many economists are of the opinion that the dividend should be used to meet the fiscal deficit target of 5.1 per cent, others have expressed the view that the unexpected bounty, which is 11 lakh crore more than the original estimate, should be used to create infrastructure to aid in India’s quest for economic prosperity. Building infrastructural facilities is a prerequisite to attract investments and it is thus argued that the government should make every effort to invest the substantial amount to attract more future dividends. Already, the news that the Centre will receive a huge payout as dividend from the RBI has given a booster shot to the volatile stock market. It has brought back reluctant players who were interested in playing safe during the election period. With their return, the stock market is expected to rise again providing the much-needed fillip to the Indian economy.
India, the fastest growing economy in the world, is facing challenges from various quarters in maintaining its high growth rate. The present socio-economic scenario is not conducive to growth as the world has been witnessing prolonged battles in Eastern Europe and West Asia. The unrest in these parts of the world has counteracted many hard-earned gains made after the pandemic. Another hurdle is that some rival nations do not want the Indian economy to grow at the current pace and are thus creating hurdles. Furthermore, global warming is also posing a challenge to India’s progress as the global rise in temperature is causing unprecedented weather phenomena, affecting every aspect of our lives.
It is crucial for India’s policymakers to cautiously consider the various hurdles as the RBI’s record dividend presents a dilemma for the government that will take the helm come June 4. There are varied expectations of what the government should do with the windfall. The bond markets will hope that the government opts to bring down its fiscal deficit, while the equity markets will want the government to increase expenditure be it through infrastructure projects or populist measures. In the run-up to the elections, the Congress party pledged cash handouts and vowed to waive farmer debts. The BJP, however, has not shown a disposition towards populist spending even in the election year and instead opted to augment infrastructure expenditure. The question of how the record payout will be allocated will be clear only on the announcement of the final budget after the election results. Regardless of which party may triumph, may the windfall be judiciously and carefully utilised.
