Currency gains: Why increasing the risk buffer is a prudent move

The RBI has been generating higher surpluses on account of, among other things, higher interest income and foreign-exchange gains

The Reserve Bank of India’s (RBI’s) central board last week approved a record surplus transfer of ₹2.69 trillion to the Union government. The government had budgeted for ₹2.56 trillion in receipts from dividend, cumulatively from the RBI and public-sector financial institutions. A higher than budgeted surplus transfer from the RBI will aid the government in achieving the fiscal-deficit target of 4.4 per cent of gross domestic product this financial year. Given that it is still early months of the financial year, it is difficult to envision with certainty how the fiscal situation will evolve over the year. However, additional revenue