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The Reserve Bank of India's (RBI) record dividend payout of Rs 2.87 lakh crore is expected to directly repair the government's balance sheet at a time when rising global energy prices and prolonged geopolitical tensions are putting pressure on India's fiscal position, according to Anindya Banerjee, Head of Commodities and Currency Research at Kotak Securities.
Speaking to ANI in an exclusive interview, Banerjee said the fiscal strain caused by elevated crude oil prices and fuel tax reductions would be partly cushioned by the central bank's surplus transfer to the government. Terming the payout a "substantial amount," Banerjee said, "A chunk of that impact has been absorbed by the government by way of cutting the excise duties on fuel... So, RBI's dividend will help to compensate some of that shortfall." He noted that the dividend comes at a crucial time as India faces increasing import costs amid continued disruptions in global energy supply chains triggered by the West Asia crisis. According to Banerjee, domestic fuel prices are likely to witness a calibrated rise in the coming months as prolonged geopolitical deadlocks continue to tighten global oil supplies. Despite occasional softening in international crude benchmarks, he said structural challenges in the petroleum market continue to keep refined fuel prices elevated. "Every day we are having a net shortage of on a very conservative basis of six to seven percent of the supplies which used to happen before March," Banerjee said. He explained that the global market is being forced to draw down inventories on a daily basis, keeping diesel and gasoline prices high despite fluctuations in Brent and WTI crude prices. The sustained supply deficit, he warned, could eventually translate into higher retail fuel prices in India. "So, government has to increase the fuel prices in the coming months," Banerjee stated. However, he added that the Centre is attempting to manage the situation in a phased and calibrated manner to avoid placing sudden stress on household budgets. "But what government is doing is doing it very smartly and in a very well calibrated manner because you don't want to create a shock across the household finances," he said. Banerjee also dismissed concerns about any immediate physical shortage of crude oil in India, highlighting the government's aggressive energy diplomacy and diversification of import sources. He added that India's strategy of sourcing oil from alternative suppliers, including Russia and Venezuela, has helped maintain supply stability despite global disruptions. On the currency front, Banerjee cautioned that the continuing tensions around the Strait of Hormuz could negatively impact the rupee by increasing dollar outflows through higher import bills and foreign investor exits. He warned that the USD/INR pair could move towards the 98-99 range if the geopolitical deadlock continues for a prolonged period, although India's free-floating currency regime would provide some natural cushioning. Commenting on bullion markets, Banerjee said global de-dollarization trends are driving stronger investor preference toward gold over fiat currencies. He emphasized that gold remains a superior monetary asset because it cannot be artificially created or destroyed by central banks. To unlock the estimated USD 3 trillion worth of gold held by Indian households, Banerjee advocated the wider adoption of Electronic Gold Receipts (EGRs). Explaining the difference between EGRs and traditional gold Exchange Traded Funds (ETFs), he said, "But ETF is a proxy on the spot because if I am an investor in the ETF, I cannot take delivery of physical gold. But in an EGR, I can do that." He described EGRs as a alternative avenue for creating a deeper and more liquid domestic spot gold market benefiting both retail investors and jewellers. (ANI)
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