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RBI and Economy – Monetary methods.!
RBI money printing must be the last option, can consider Covid bonds: Subbarao
The central bank can directly print money & finance the govt, but it should avoid doing so unless there is absolutely no alternative, former RBI governor D Subbarao on Wednesday said while pointing out that India is ‘nowhere near such a scenario.
In an interview with PTI, Subbarao suggested that to deal with the second wave of COVID-19 induced slowdown in the economy, the govt can consider Covid bonds as an option to raise
borrowing, not in addition to budgeted borrowing, but as a part of that.
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“It (RBI) can (print money) but, it should avoid doing so unless there is absolutely no alternative. For sure, there are times when monetisation despite its costs – becomes inevitable such as when the govt cannot finance its deficit at reasonable rates.” We are nowhere near such a scenario,” he said. India’s economy contracted by less-than-expected 7.3 per cent in the fiscal ended March 2021. For 2021-22, the deficit has been put at 6.8 per cent of the GDP, which will be further lowered to 4.5 per cent by 2025-26.