To face problems of cash flow a few months before the national election, Prime Minister of India Narendra Modi could be a savior in the country's new central bank chief.
India's expenditure is more than its revenue, which is why the government is looking for money to help the sick banking sector - the key to promoting loans and investments and to make jobs. Officials of the finance ministry estimate that the Reserve Bank of India needs at least 3.6 trillion rupees ($ 50 billion) of capital, which they say they say that can be used to help strengthen the banks is.
Eurasia Group Says
Sasha Risar-Koštiski, an analyst at Eurasia Group, said, It will be difficult for the government to meet its target, substantial new revenue from sale of property or as a transfer from RBI. The government may also seek to postpone losses for postponing some payments in the next financial year.
The general election in the next year
It is important for PM Modi to firing economic engine before a general election the next year, whose party had stopped from defeat in the main regional elections last week. While using RBI's surplus capital to support banks, there was an issue of dispute with former governor Urjit Patel, it can not be the case now.
After Patel's Exit
A former bureaucrat Shaktikant Das, picked by PM Modi to run the RBI after Patel’s exit, is open to the government on their concerns about the economy - whose growth slows in September through three months. For the Reserve Bank of India, it will help boost the government without losing its target of 3.3 percent of the budget deficit for sharing its capital.
Although the government has refused to ask the Reserve Bank of India for any special amount, the central bank has agreed to create an expert panel to decide on the appropriate level of reserving reserves.
The government is planning to introduce some 420 billion rupees ($ 5.9 billion) for recapitalization to some state-run banks this month. It will also have to pay for health care program and farmers will have to purchase crops at guaranteed prices.
Everyone agrees that state-run banks need to do more for recapitalization but all do not agree with how the administration is going about it. S & P Global Ratings said that the growing participation of the government in central bank cases could reduce the profit in the country's banking system.
Revenue
With total revenues of 45.7 percent for the whole year's target and less than 48.1 percent of the previous year, the tax authorities and the asset sales department are increasing with the total revenue, so that the targets are good at the target.
Monthly collection of new goods and services tax has detected the target of 1.1 trillion rupees, and the Finance Ministry is banking on direct taxes for the shortage. The share of stake sale in state-run companies has also come down, only 42 percent of the targeted target has been realized.
Expenses
The expenditure in April to October was 59.6 percent of the budget estimate. In order to provide guaranteed prices to the farmers for the crops, a program is expected to be included in the food subsidy bill, while fuel subsidies have increased in oil prices.
In September, the cost of the health care program worth Rs 120 billion kicking is expected to be reflected in the fiscal second half.
Expenditure may be required to meet budget goals, but it can be easier said than done in the election year.
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