RBI monetary policy: Central bank rules out printing more money to cover fiscal deficit

Mumbai: RBI Governor Shaktikanta Das on Thursday said the central bank has no plans to monetise the rising fiscal deficit. This is the third consecutive year that the government has revised its fiscal deficit target. The budget has pegged fiscal deficit at 3.8 percent for the current fiscal year, up from 3.3 percent projected in the previous budget; and at 3.5 percent for FY21, up from 3 percent estimated in the July 2019.

The government has already crossed the fiscal deficit at 132 percent of the estimate as of December end. The government has utilised ’escape clause’ under the Fiscal Responsibility and Budget Management (FRBM) Act which provides it a 50 bps leeway for relaxation of fiscal deficit roadmap during time of stress. Accordingly, it has budgeted a net borrowing Rs 5.45 lakh crore from the market in FY21. “There is no plan to monetise the government’s fiscal deficit,” Das told reporters during the post-policy conference.