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Another RBI dividend booster in sight

Mumbai: Economists expect the Reserve Bank of India's (RBI) dividend to the government to surpass a record over Rs2.5 lakh crore this year as the central bank earnings, through the sale of dollars to prop up the rupee as it sharply depreciated during 2024-25, are reported to have shot up. This higher profit will be transferred to the government as a dividend in 2025-26. The previous record dividend transferred to the government stands at Rs2.1 lakh crore during 2024-25, which helped to keep the fiscal deficit in check, while enabling the Finance Ministry to continue with its expenditure on big ticket infrastructure projects to spur growth and social welfare schemes to uplift the poor. This was a record jump from the Rs87,416 crore transferred to the government in 2023-24 for the profit made in 2022-23. Similarly, the government is expected to get another booster shot through the RBI dividend in the current financial year as well. 'Among the RBI's earnings, forex transactions are expected to be most significant in light of the in light of the central bank's measures to lower rupee volatility by strong dollar purchases earlier in fiscal 2025 and difference in the current versus historical exchange rate. Add to this the interest income on government securities and earnings from funds extended to banks in midst of previous tight liquidity. 'This transfer could amount to a record high at around Rs2.5-2.7 lakh crore this year,' said Radhika Rao, senior economist at DBS Bank. Earnings on forex transactions are expected to be substantial with gross dollar sales tracking at $371.6 billion in fiscal 2025 till February compared to $153 billion in fiscal 2024, according to Gaura Sengupta, chief economist at IDFC First bank. She estimates the RBI dividend to be between Rs2.6 lakh crore to Rs3 lakh crore, according to an NDTV Profit report. The higher dividend creates fiscal space of 0.1 per cent to 0.2 per cent of GDP, estimates Sengupta. With support from the higher-than-budgeted RBI surplus and savings on a few expenditure heads, the central government is in a fairly strong position to counter the growth slowdown risks and any potential emergency spending requirements.