The Reserve Bank of India’s bumper dividend will ease the fiscal position for FY26, potentially reducing the fiscal deficit: Economists
This dividend is 27 percent higher compared to last year’s transfer of ₹2.11 lakh crore.
RBI gives another bonus dividend to the government.
The ₹2.69 lakh crore bumper dividend announced by the Reserve Bank of India will help ease the fiscal position, assisting the government in improving upon the 4.4 percent deficit target set for the year, economists said on May 23.
“For the 2025-26 Union Budget, dividend income of ₹2.56 lakh crore was estimated from the Reserve Bank and public sector financial institutions. With today’s transfer, this figure will be significantly higher than the budget. We expect the fiscal deficit to be 20 to 30 basis points lower than the budget level, reaching 4.2 percent of GDP. Alternatively, this could open the way for additional expenditure,” said Soumya Kanti Ghosh, Chief Economic Adviser at SBI.
This dividend is 27 percent higher compared to last year’s transfer of ₹2.11 lakh crore, which helped the government achieve the fiscal deficit target despite missing disinvestment goals. Aditi Nayar, Chief Economist at ICRA, said, “This is approximately ₹0.4-0.5 lakh crore (equivalent to 11-14 basis points of GDP) higher than the amount likely estimated in the FY2026 Union Budget, implying an equivalent increase in non-tax revenue, which will provide some buffer to offset shortfalls in taxes or disinvestment receipts, or higher-than-budgeted expenditure in the fiscal year.” This is the second consecutive year that the government has received a dividend exceeding ₹2 lakh crore from the central bank.
Economists believe that higher interest income from government securities, along with foreign exchange sales, may have contributed to the better surplus from the Reserve Bank of India.
Madhavi Arora, Chief Economist at MK Financial, said, “While the balance sheet details are yet to be released in the annual report, we understand that the bumper dividend is due to (1) high gross FX sales of ~$398 billion in FY25, compared to $153 billion the previous year, leading to increased foreign income, (2) higher interest income from G-secs, and (3) lower provisions for revaluation losses on assets amid potential MTM gains on foreign and domestic asset holdings.”
Although the government failed to meet its capital expenditure target last year, it plans to achieve the target this year amid global uncertainties and concerns about a renewed slowdown in private sector capital expenditure.
The capital expenditure target for this year has been increased to ₹11.2 lakh crore, slightly higher than last year’s budget estimate of ₹11.1 lakh crore.
Lower capital expenditure could harm India’s growth prospects, which are already constrained by global uncertainties.
In its forecast released last month, the International Monetary Fund lowered India’s FY26 growth forecast to 6.3 percent compared with 6.5 percent projected in January.