The Reserve Bank of India's decision to transfer $24.6 billion to the government is unlikely to spur new stimulus measures from New Delhi, experts say.
India's government is set to receive a windfall from the central bank, but analysts say there is limited scope to spend all that money.
The Reserve Bank of India logo is displayed outside of the bank's headquarters in Mumbai, India, on Tuesday, Aug. 9, 2011.The Indian government is set to receive a windfall gain from the central bank amid the economy struggling to accelerate growth. Analysts, however, argue that there is limited scope to spending that money.the central bank will transfer 1.76 trillion Indian rupees as dividend
On one hand, India needs policies to help prop up growth, which has slowed considerably in recent quarters. On the other hand, it needs to maintain the 3.3% fiscal deficit target set for the current year — or risk denting investor confidence in India. They explained in a note this week that Monday's announcement removes the possibility of such large transfers over the next several years.Analysts told CNBC the government will likely opt to use the dividend to plug a predicted "shortfall in its budgeted tax revenues," instead of funding additional spending plans or scaling back on full-year borrowings.
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