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Farm debt waivers may lead to 20-bps permanent rise in inflation: RBI study

RBI staff study estimates other states could end up waiving another Rs 40,000-57,000 cr of farm loans in all

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Farm Debt Waiver

Anup Roy  |  Mumbai 

A study by the Reserve Bank of India (RBI) staff says that if the combined fiscal deficit of the states on account of farm debt waivers goes up by 40 basis points to 5.9% of gross domestic product, there could be around a 20-basis-point permanent increase in inflation, starting 2017-18. One basis point is a hundredth of a percentage point.

This is not the official view of the RBI, but of some of its research staff, but the central bank has been warning about the impact of farm debt waivers on inflation and interest rates. RBI Governor Urjit Patel in a recent speech said farm ...

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First Published: Tue, September 12 2017. 00:54 IST
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