Question Q.11GS1GS3
Recently, the Reserve Bank of India (RBI) announced a transfer of surplus to the Union Government for the financial year 2024-25. What does 'surplus' mean in this context? How does the RBI generate it, and what is its significance for the country's fiscal policy?
Main Body
RBI recently announced a fund transfer of around Rs 2.6 lakh crore which is the highest ever surplus transferred with 2D. Mail over 2004. What is surplus:income generated by RBI from various sourcesthe remaining amount to money live after meeting admin expenditure & other needs How it's generated: (1) Seignagethe difference between cost of printing money v/s actual value of money (2) Loans given to foreign countries
Interest generated over them (3) State govt. securities met by Centreleads etc & interest over them (4) Govt. investments in various financial instruments such as shares (5) Profit from RBI activitiessuch as marked operations OMO (6) Income from depends of banksCRR and others Significance: (1) Provides funds to govt. for financing budget's deficits (2) FD is around 5.4% in debt (3) Cushion budgeting revenue-expansive of govteg Subsidy burden of around 2.9 GDP (4) Helps in supporting fiscal consolidation efforts eg N K Singh FREM target of 50% debt: GDP (5) Reduce govt. depending on loans & borrowingInternal payment liability Gradations (6) Supports capex efforts of govteg Rs 11.1 lakh cr target (7) Gives space to fiscal policy innovation eg Interest free loans to states (8) Helps govt. meet its targets such as debt reduction, inflation control (9) Boast money multiplier by govt. investment enhancement (10) Perpetuates dependency on RBI by 90% Concerns:Can lead to fiscal slippageDebt: GDP may not come down if funds misutilized for populism
256 words1 paragraphs
Conclusion
RBI surplus transfer is significant for fiscal consolidation but must be utilised prudently to avoid fiscal slippage.
17 words
Topper
ASTHA JAIN
AIR 92025
Subject & Paper
GS1GS3
Topic
Economic Development
Government Budgeting
RBI surplus transfer and fiscal policy
Writing Stats
273
Total words
1
Paragraphs