Monetisation of govt's fiscal deficit by RBI is tricky, say economists

The RBI is kept out of directly monetising the government's fiscal deficit because it may give rise to unproductive spendings.

Economists are of the view that any decision to monetise the government's fiscal deficit by the Reserve Bank of India (RBI) will be a complex one as the move has both advantages and disadvantages.

"It (monetising the government deficit) will be a tricky one. It requires coordinated call by both the Reserve Bank and the government," Sonal Varma, chief economist at Nomura said during a webinar, organised by the National Council of Applied Economic Research (NCAER).

She said the advantage is that it can work against rising bond yields. If the yields on the government bonds themselves rise, it would