Indian GDP may not shrink too severely: DEA Secy
Published On: Friday, July 24, 2020 | By: Team KnowMyStock
Economic Affairs Secretary Tarun Bajaj Speaking at an event organised by industry body Ficci, said that based on tax collections so far, India’s economic contraction in this fiscal year might be less severe than anticipated and that the proposal of a ‘bad bank’ had been discussed internally, but no decision had been taken. “Currently, there is no proposal for debt monetisation on the table. Questions on fiscal position and debt monetisation plan should be asked after three-four months,” said Bajaj. Economists, including former RBI governor Raghuram Rajan, and former advisor to the Prime Minister, Rathin Roy, have advocated that the government can get the RBI to monetise deficit, provided it has a clear expenditure plan on where it wants to spend the resources it raises.
Monetising the deficit is when RBI directly purchases government bonds (G-secs) on the primary market to help with the Centre’s expenditure. In turn, the RBI prints more money to finance this debt. The practice of monetising deficit was in vogue till 1997, when it was discontinued by then RBI governor C Rangarajan.
Tags: Indian GDP debt monetisation
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