Crying wolf.

"The Economic Survey 2024-25 projected India's GDP to grow between 6.3% and 6.8% in 2025-26," and "the RBI expects the Consumer Price Index (CPI)-based inflation to remain stable at 4%." Mint. The Union Budget 2025-26 projected net tax receipts at Rs 28.37 trillion, fiscal deficit at 4.4% of GDP and the gross market borrowing at Rs 14.82 trillion. india.gov.in. However, government spending on defence may have to increase following Operation Sindoor (wikipedia) although the losses suffered by the Indian armed forces have been concealed. The government expects to cover the extra expense from dividends in excess of Rs 800 billion from state run companies and the "Kotak Mahindra Bank Ltd estimates the Reserve Bank of India (RBI) to transfer as much as Rs 3.5 trillion ($41.4 billion) to the government while IDFC First Bank Ltd forecasts the dividend to be about Rs 3 trillion in the fiscal year." ET. This will be the highest ever payout by the RBI, exceeding last year's highest of over Rs 2.10 trillion. infometrics.com. However, "The way RBI calculates the dividend it pays to govt may soon change, with the central board of directors reviewing the economic capital framework." The last time such an exercise was undertaken in 2019, the RBI transferred the then record amount of over Rs 1.76 trillion "boosting Prime Minister Narendra Modi-led regime's prospect to stimulate the slowing economy without widening fiscal deficit." TOI. The Bimal Jalan Committee recommended maintaining the contingent risk buffer at 5.5%-6.5% of the RBI's balance sheet. "This range plays a critical role in determining how much surplus the central bank retains and how much it can transfer to the government." The RBI has bought bonds worth Rs 1.2 trillion and plans to buy another Rs 1.3 trillion worth of bonds in May through Open Market Operations (OMO). "Institutions expect cumulative purchases via OMO of at least Rs 4 trillion in FY26 would be needed for policy rate transmission." ET. Added to this, the record payout to the government is expected to increase liquidity in the banking system to Rs 5.5 to Rs 6 trillion and help in reducing the cost of lending (TOI), which will further help the government by reducing the interest it pays on its borrowings. The RBI sold an estimated $250 billion to support the rupee which dropped from around 70 to the dollar in 2019 to over Rs 81 to one dollar in 2022 (bankbazaar.com). "The sale of dollars at higher levels immediately created profits for RBI since those dollars were purchased at a much lower price." "The RBI balance sheet since 2017 has grown by 113% whereas India's GDP is up 61% in nominal dollar terms. This pace of expansion does not seem commensurate with economic activity." "If the size of reserves exceeds the insurance coverage needed and then that excess is used to book profits on dollar sales to generate dividends, it calls for scrutiny. Is there not a conflict between aiding exports and fortifying the government's treasury?" asked Ajit Ranade. This is probably a polite way of asking if the RBI is directly and indirectly monetizing the fiscal deficit of the government (wikipedia). "Since nationalisation in 1949, the Reserve Bank is fully owned by the government of India." rbi.org.in. In 2018, then Deputy Governor of RBI Prof Viral Acharya resigned after warning the government of interfering in the RBI's functioning, giving the example of Argentina in 2010. DH. Was he crying wolf (wikipedia)? Will the wolf really attack? Depends on the RBI.