Go in for monetization, higher fiscal deficit in measured way: Rajan

Former RBI Governor Raghuram Rajan has suggested that the government should go in for monetization and higher fiscal deficit in a 'measured' way to protect the health of the economy in these 'abnormal times'.

The government is trying to garner resources to combat the impact of coronavirus on the economy and the Finance Ministry on Friday decided to raise market borrowing programme by 54 per cent to Rs 12 lakh crore for 2020-21, up from Rs 7.8 lakh crore estimated in February.

Monetization, which is loosely referred to printing of currency by the Reserve Bank, need not be a constraint on government spending, Rajan said in a blog, adding, "government should be concerned about protecting the health of the economy and should spend what is needed."
"However, its inability to finance itself or fears of monetization should not be a constraint. Monetization will neither be a game-changer nor a catastrophe, if done in a measured way. In fact, India is already doing it! However, the caveat it should be measured -- is key."