The government needs cash after allocating 200 billion rupees toward the first installment of the $10.5 billion program by March 31.
Reserve Bank of India has approved an early transfer of a part of its profit to the government, which is desperate for cash to fund populist pledges ahead of a national election.
The Reserve Bank of India’s board, approved 280 billion rupees ($4 billion) as interim dividend, according to a statement. This is the second straight year that the RBI has announced an advance payment to Prime Minister Narendra Modi’s government.
In approving the measure, the RBI is emulating Turkey’s central bank that came to the aid of its government before municipal elections in March seen as a referendum on President Recep Tayyip Erdogan’s rule. The RBI dividend will help Modi’s government partly bridge a budget gap and could be key to funding an income support program for farmers ahead of a national vote due by May.
The government needs cash after allocating 200 billion rupees toward the first installment of the $10.5 billion program by March 31. The cash support — handing about 120 million farmers with up to 2 hectares (4.9 acres) three payments of 2,000 rupees per year — was Modi’s last attempt at reversing fortunes after his Bharatiya Janata Party lost control of three key states in regional elections in December.