RBI highlights govt.'s imbalances - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

RBI highlights govt.'s imbalances

Apr 21, 2009

The RBI's annual review of its monetary policy, which is expected to be more of a ritual today rather than a newsmaker, will have little to elaborate on the central bank's policy moves. The reasons being the RBI's limitation so far in impacting economic and credit growth through its monetary tools and its compulsion to release liquidity by buying back bonds to support the government's borrowing plans. The RBI in its statement of 'Macroeconomic and Monetary Developments' released yesterday did not shy away from projecting a cautious outlook for the Indian economy, which it said 'continues to exhibit the persistence of less than normal sentiments'.The RBI's concerns are further articulated in the annual accounts of the central government which clearly show an imbalance between the components of receipt and expenditure. While the revenue receipts have almost remained stagnant in the past fiscal, the Centre relied heavily on capital receipts, particularly market borrowings.

On the expenditure front, the upcoming polls seem to have had an overbearing on the Centre's expenditures with the expensive borrowed funds having been generously given away in the form of subsidies to appease voters. In fact as a percentage of GDP, subsidies comprised 2.5% of the country's GDP in FY09 (1.5% in FY08), the highest in the past decade.

Receipts of the Centre

(Rs bn) FY08 FY09 Change
Revenue receipts 5,419 5,621 3.7%
Tax revenue 4,395 4,659 6.0%
Non tax revenue 1,024 962 -6.1%
Capital receipts 1,708 3,388 98.4%
Borrowings 1,306 2,665 104.1%
Recoveries of loans 51 97 90.2%
Disinvestment proceeds 45 26 -42.2%
Other 306 600 96.1%
Total receipts 7,127 9,009 26.4%

Expenditure of the Centre

(Rs bn) FY08 FY09 Change
Non plan expenditure 5,076 6,180 21.7%
Interest payments 1,710 1,927 12.7%
Defence expenditure 917 1,146 25.0%
Subsidies 709 1,292 82.2%
Other 1,740 1,815 4.3%
Plan expenditure 2,051 2,829 37.9%
Total expenditure 7,127 9,009 26.4%

While it is pertinent for the government to increase its tax revenue receipts in FY10 (dropped from 12.6% of GDP in FY08 to 11.1% of GDP in FY09), other means such as divestment of stakes in PSUs can help reduce the borrowings and correct the imbalance. However, all such fiscal measures can take shape only after the conclusion of the general elections. Meanwhile, the Centre has passed on the mantle of maintaining monetary balance to the RBI. Over to the central bank.

Equitymaster requests your view! Post a comment on "RBI highlights govt.'s imbalances". Click here!


More Views on News

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

ONGC to NMDC: Here are 5 Stocks Value Investors Should Closely Track (Views On News)

Nov 26, 2021

Before investing in value stocks, research the company and gain insight into why the market is discounting it.

Top 5 Stocks FIIs Bought and Sold Recently (Views On News)

Nov 25, 2021

FIIs have largely stayed on sidelines for the past few months, withdrawing money across emerging markets.

Everything to Know About the Upcoming Tega Industries IPO (Views On News)

Nov 27, 2021

Are you looking to apply for the Tega Industries IPO? You must ensure that you know specific details.

3 Charts on Why the Indian Bull Looks Tired podcast (Views On News)

Nov 27, 2021

Rahul Shah explains the key reasons behind his pessimistic outlook on the stock market.

More Views on News

Most Popular

What is EBITDA & EPS?

Here's a breakdown of what EBITDA margin means and why it is important as a valuation metric for investors.

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

How to Hit Rs 100 Crore Wealth in Your Lifetime (Equitymaster Wealth)

Nov 15, 2021

This is how you can achieve the ambitious goal of a net worth of Rs 100 crore.

Don't Sell these Stocks if the Market Falls (Profit Hunter)

Nov 17, 2021

These are the 3 types of stocks that you should not sell in a market crash.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Nov 26, 2021 (Close)