And where will the government use some of the money it will get? After all, it will have access to the financial reserves that the banks will set aside. That will give the government around Rs 3 lakh crore of funds. Add to this the profit that the Reserve Bank of India is likely to show by cancelling out the Rs 3 lakh crore that may not get deposited to banks. The RBI’s profits will most probably get transferred to the government as dividends. Thus the government may end up with a Rs 6 lakh crore surge in spending power.
Most people expect this money to be used as the government’s contribution towards infrastructure building. Remember, foreign funds may want a matching contribution from India. This is where the additional money will be immensely useful.
After all, the key focus of the government will also be to increase employment, to compensate for the loss of jobs demonetisation is bound to cause. That is where spending on infrastructure and related service areas (transport, tourism) will become high priority sectors for the government.
So while the collection of money looks rosy, the pressures on the government to provide for more employment will prevent it from enjoying the fruits of such monetary collections.
(Sourced from agencies, feature image courtesy:thehindu.com)
