Non-tax revenues can act as 'gamechanger' for Budget math as RBI surplus expected to dip: ICRA

Non-tax revenues can act as a "gamechanger" in the Centre’s budget calculations, as the Reserve Bank of India’s (RBI) dividend surplus is likely to decline in FY2025 due to falling interest rates in major global economies, according to the ICRA.

The credit rating agency, in its budget expectation note, said the RBI’s foreign earnings, a major component of its income, are projected to ease from the record ₹1.87 lakh crore in FY2024.

On the domestic front, income from rupee securities is also expected to decline slightly in FY2025.

The central bank’s holdings of domestic securities, including Treasury bills, reduced to ₹12.5 lakh crore by December 27, 2024, from ₹13.6 lakh crore in FY2024, alongside lower yields on government securities.

"Accordingly, the RBI’s total income (from both domestic and foreign sources) is expected to moderate slightly in FY2025 from Rs. 2.8 trillion in FY2024," ICRA said.

As a result, the surplus transferred to the government is expected to drop from ₹2.1 lakh crore in FY2024, according to the report.

The report suggested that the government’s dividends and profits could fall by 12-13% to ₹2.7 lakh crore in FY2026 from ₹3.1 lakh crore estimated for FY2025, mainly on account of a likely dip in dividend surplus from the RBI.

While ICRA pegs the non-tax revenues of the government to decline by 6-7% YoY to ₹5.1 trillion in FY2026, it said any swings on this account could "keenly influence the budget math."

"For instance, a 10% growth in the non-tax revenues over the FY2025 BE would enhance the fiscal space by as much as ₹0.9 trillion vis-à-vis our current assumptions, which can provide room for additional capital spending," the agency said.

The Centre’s total revenue receipts are expected to grow by 7-8% to ₹33.5-33.8 lakh crore in FY2026, up from ₹31.3 lakh crore in FY2025, it added.