In the loop.

At the end of 2025 India became the fourth largest economy in the world. "With GDP valued at $4.18 trillion, India has surpassed Japan to become the world's fourth-largest economy and is poised to displace Germany from the third rank in the next 2.5 to 3 years, with projected GDP of $7.3 trillion by 2030," the government release said. TOI. One US dollar buys Rs 90.66 this morning. xe.com. Taking an exchange rate of Rs 90.60 to one dollar, $4.18 trillion amounts to Rs 378.71 trillion. "In absolute terms, the (2025) budget projected nominal GDP to be Rs 356.98 trillion." "The first advance estimate puts it at Rs 357.14 trillion which will be marginally higher than the Budget aim." This converts to $3.94 trillion, sharply lower than $4.18 for fourth position. "The government's tax collections have grown only 3.3% in April-November, sharply lower than 10.8% growth aimed for in the Budget." The shortfall has been filled by increased dividends and profits from public sector undertakings (PSUs), wrote Nandita Venkatesan. Since they are controlled by the government, they may have been told to 'stand and deliver'. They have already coughed up Rs 3.4 trillion, 104% of the Budget estimate. To help the government raid PSUs, "The Reserve Bank of India's (RBI) draft circular allowing banks to distribute up to 75% of their net profits as dividends, up from the earlier 45%, may open the door for higher payouts particularly from public sector banks (PSBs) where the government is the major shareholder." ET. Of course, they will obey government diktat. Already, the RBI has reduced the Cash Reserve Ratio (CRR) by 100 basis points, to increase liquidity and bring down borrowing costs. ET. The CRR is "the percentage of a commercial bank's total deposits that must be maintained as liquid cash with the RBI. This reserve is not available for lending or investment." cleartax.in. It also provides protection for our deposits. Total bank deposits have increased from Rs 18.4 trillion in FY05 to Rs 241.5 trillion in FY25, while bank credit has increased from Rs 11.5 trillion to Rs 191.2 trillion over the same period. ET. "The share of bank deposits in overall financial savings fell from 40.9% in FY21 to 35.2% in FY25." So, fresh credit amounted to 102% of deposits. The Wire. On 13 Jan, Bloomberg Index Services deferred inclusion or Indian government bonds in its flagship Global Aggregate Index which pushed up yields by 10 basis points. To support prices of G-secs and bring down yield, "The RBI has bought Rs 2.54 trillion ($27.99 billion) of bonds since December," and "Bond purchases in December and January are slated to exceed the Rs 2.76 trillion bought by the central bank between April and November." Reuters. Buying government bonds from the market, is the same as quantitative easing, and once central banks start financing fiscal deficit they cannot stop. It may result in a doom loop, wrote Prof Raghuram Rajan. If India is richer than Japan, and soon to overtake Germany, why is the RBI transferring our deposits to the government and resorting to quantitative easing? Hope we don't lose all. To protect the government.