03 SEP,2019 | MEDC
The RBI’s decision to transfer Rs. 1.76 trillion to the central government would make the fiscal deficit target of 3.3% of GDP easily achievable, as tax revenue would then be required to grow at 16% in the remaining part of the fiscal year. The RBI’s transfers would effectively add Rs. 58,000 crore to the Centre’s kitty in the current fiscal year. In the worst-case scenario, the entire amount would be used to balance the tax shortfall, while in the best-case scenario, the entire amount would be used to boost capital expenditure. Both of these scenarios are unlikely. The most likely scenario is that some money will be used for balancing the revenue shortfall and the rest will be utilized for capital spending in priority sectors like roads, affordable housing, waterways etc. and in the process also lead to job creation.
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