Budget 2024: Will a dividend target of Rs 70,000 cr from RBI, banks aid lowering fiscal deficit?

Budget 2024: The government aims to bring down the fiscal deficit from an expected 5.9 percent of GDP in 2023–2024 to below 4.5 per cent by 2025–2026 as part of its fiscal consolidation strategy. In line with this, the government is targeting a fiscal deficit of 5.4 per cent of GDP for the upcoming fiscal year.

The government anticipates receiving around Rs 70,000 crore from the Reserve Bank of India (RBI) and financial institutions (FIs) in the forthcoming fiscal year, following significant dividends from the RBI in the current fiscal year.

Reports suggest that the government plans to set a higher target for earnings from financial institution dividends compared to the Rs 48,000 crore projected in the interim budget for the current fiscal year. Finance Minister Nirmala Sitharaman is set to present the budget to the Lok Sabha on February 1.

Budget 2024: Boosted dividends

The government has already surpassed its budget target for the current fiscal year, thanks to the RBI's payment of Rs 87,416 crore in dividends. Public sector banks and financial institutions are expected to pay out higher dividends in the upcoming fiscal year due to their robust quarterly performance.

Reports indicate that dividends from the RBI and financial institutions are expected to reach around Rs 70,000 crore in FY’25. In 2023–24, the government earmarked Rs 48,000 crore, reflecting a 17 per cent increase in dividends from public sector banks, financial institutions, and the RBI.

Budget 2024: Surplus, revenue mobilization

The RBI's surplus distribution to the government for 2022–2023 far exceeded expectations, amounting to Rs 87,416 crore. This surplus transfer surpassed the previous year's Rs 30,307 crore and the budgeted Rs 48,000 crore under the Dividend/Surplus transfer of the RBI, Nationalized Banks, and Financial Institutions in the Union Budget 2023–24.

During the previous fiscal year, the government received Rs 40,953 crore from the RBI and public sector financial institutions. The increased dividend from banks and financial institutions is expected to aid in achieving the budget deficit glide path.

Budget 2024: Fiscal consolidation plan

The government's fiscal consolidation plan aims to reduce the fiscal deficit to below 4.5 per cent of GDP by 2025–2026. As per the roadmap, the fiscal deficit is targeted at 5.4 per cent of GDP for the upcoming fiscal year commencing on April 1, 2024.