New Delhi: Former RBI Governor D Subbarao said on Wednesday that the central bank can provide necessary finance to the government by directly printing the notes but it should be used only if there is no other solution left. He also said that this is not the case in India at present. Subbarao said the second wave of corona epidemic and the "lockdown" imposed at the state level to control it has softened the economy. To get rid of this, the government may consider the option of bringing in covid bonds to raise money. It should be under it and not the debt fixed in the Budget.
He said RBI can print the note directly, but it should happen only if there is no other solution left. There is certainly a time when printing of additional currency is necessary even after adverse effects. This is the situation when the Government cannot finance its losses at a logical rate.
However, we are not in that situation yet, Subbarao said. The country's economy declined by 7.3 per cent in the fiscal ended March 2021, which is lower than various possibilities. The government has projected the fiscal deficit to be 6.8 per cent for the financial year 2021-22. It is targeted to be reduced to 4.5 percent by 2025-26. The Reserve Bank has lowered the country's economic growth forecast for the current fiscal from 10.5 percent to 9.5 percent in view of the uncertainty caused by the second wave of epidemics.
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