The RBI’s record surplus transfer to the Centre, 6.7 per cent higher than last year, is expected to provide only partial relief to government finances as rising subsidy burdens and lower revenue expectations linked to the West Asia crisis threaten to strain the FY27 fiscal arithmetic.
Economists remain divided over the extent of support the transfer will provide, with some viewing it as a useful buffer against higher expenditure pressures and others arguing that the payout may not prevent a breach of the fiscal deficit target.
Budget Dependence
In the FY27 Budget, the Centre had projected ₹3.16 lakh crore under the non-tax revenue head from “Dividend/Surplus of Reserve Bank of India, Nationalised Banks and Financial Institutions”, implying that the RBI transfer alone accounts for over 90 per cent of the BE.
However, West Asia tensions are expected to weigh on the Centre’s finances through both lower revenues and higher expenditure. Economists estimate that the fertiliser subsidy bill could rise by over Rs 70,000 crore, while the recent excise duty cuts on fuel may lead to a revenue loss exceeding ₹1 lakh crore.
“This is a marginal increase in non-tax revenues which will be useful to partly neutralise some of the expected increase in food, fertiliser and petroleum subsidies in the wake of the ongoing West Asian crisis,” said D K Srivastava, Chief Policy Advisor at EY India.
DK Pant, Chief Economist at India Ratings & Research, noted that the transfer would have been over ₹64,500 crore higher had the RBI maintained the contingency risk buffer at last year’s level. The higher allocation to the contingency risk buffer would strengthen the central bank’s ability to intervene in financial markets, he said, adding the surplus transfer would “reduce some pressure on fiscal deficit”.
Fiscal risks
However, Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, termed the surplus transfer lower than expected, thereby “limiting the levers for the government in terms of managing the fiscal slippage risks”, although she does not foresee risks of additional market borrowing for now.
Aditi Nayar, Chief Economist at ICRA, said the fiscal position is likely to remain under pressure due to expectations of higher fertiliser and fuel subsidies as well as lower tax collections and dividends from oil marketing companies.
“We expect the GoI to exceed the budgeted fiscal deficit target for FY27 of 4.3 per cent of GDP by 40 basis points, assuming an average crude oil price of $95 per barrel during the fiscal,” she said.
Published on May 22, 2026