The government expects Rs.58,000 crore in dividend from the Reserve Bank of India (RBI) in the next financial year, which is 12 per cent lower than what the finance ministry received last year, a senior finance ministry official said. During the last fiscal the Central Bank paid Rs.65,876 crore.

The expected payout from RBI in financial year 2017-18 does not factor in any special dividend from the central bank on account of demonetisation. The government did not want to make any imaginary assumptions, the official said.

However. experts believe that the lower amount estimated by the government proves that the demonetisation move has not benefited the government at all, but has added to the RBI's woes since it has to spent Rs.15,000 crore to Rs.18,000 crore for printing new currency.

The RBI pays a dividend to the government in August after closing its accounts in July. Over the past few years, the RBI has made it a practice to transfer the entire surplus generated through the central bank’s investment activities to the government.

However, the official added that the government has budgeted contribution of Rs.74,901 crore dividend from the central bank, nationalised banks and financial institutions for the next fiscal.

The RBI's main source of income is from commissions and discounts earned through currency market interventions and interest earned on bond holdings through open market operations or purchase and sales of government securities.

The surplus approved by the Reserve Bank of India board could be used to fund the government's fiscal deficit. The FRBM committee proposed a fiscal deficit target of 3 per cent for the fiscal year 2017-18. The government had kept the fiscal deficit for 2015-16 at 3.9 per cent of GDP but it was countered by the CAG in its report where it has recently noted that the fiscal deficit was actually higher at 4.3 per cent last year.

While presenting the Union Budget 2017-18 on 1 February, Union Finance Minister Arun Jaitley said the government will sway slightly from its fiscal deficit target for the next financial year to 3.2 per cent of gross domestic product, from the previous aim of 3 per cent.

On the impact of the Seventh Pay Commission recommendations on the government’s finances, the official said the Union Budget for fiscal 2017-18 did not account for an increase. The government, however, expects a higher outgo on account of these allowances. A committee headed by finance secretary Ashok Lavasa, which was set up to review the allowances, is yet to submit its report to the finance minister.