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?

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 sources → the remaining amount to money live after meeting admin expenditure & other needs How it's generated: (1) Seignage → the 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 Centre → leads etc & interest over them (4) Govt. investments in various financial instruments such as shares (5) Profit from RBI activities → such as marked operations OMO (6) Income from depends of banks → CRR 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 govt → eg 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 & borrowing → Internal payment liability Gradations (6) Supports capex efforts of govt → eg 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 slippage → Debt: GDP may not come down if funds misutilized for populism

— ASTHA JAIN · AIR 9