This week’s Wednesday RBI announced a record dividend of ₹2.11 trillion or $25 billion transfer to Government, more than double of what everyone estimated.
It means upcoming government will get cheque of $25 billion from central bank and they will have two options on how to spend it -
1. Bring Fiscal deficit down. The surplus can help the new government bring down its fiscal deficit by 0.3% of the GDP.
2. Increasing spending on Infrastructure or give money to people in form of stimulus (government schemes)
Bond market will cheer up if government decides to bring down fiscal deficit, whereas equity market wants government to spend that money and propel growth.
It means upcoming government will get cheque of $25 billion from central bank and they will have two options on how to spend it -
1. Bring Fiscal deficit down. The surplus can help the new government bring down its fiscal deficit by 0.3% of the GDP.
2. Increasing spending on Infrastructure or give money to people in form of stimulus (government schemes)
Bond market will cheer up if government decides to bring down fiscal deficit, whereas equity market wants government to spend that money and propel growth.