ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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Chimera of Monetised Deficit

IN its Annual Report for 1995-96 the Reserve Bank has suggested that the central budget should present an estimate of the monetised fiscal deficit consistent with the objectives of overall monetary control. The proposal should cause some raising of eyebrows for two reasons. First, it is difficult to estimate in advance how much of the fiscal deficit would have to be financed by RBI credit. Second, and more important, what turns out to be the final year-end monetised deficit may contain a major component determined not by the year's fiscal operations and needs but by the central bank's open market operations in keeping with the emerging monetary situation, over which the RBI should have exclusive control.

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