Question

Deficit financing and its implications for the indian economy
Lenghty

Answer 1

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Government may borrow from RBI against its securities to meet the fiscal deficit. RBI issues new currency for this purpose. This process is known as deficit financing. ... On the other hand, deficit financing may lead to inflationary trends in the economy due to more money supply

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Answer 2

Deficit Financing can be defined as the planning of money and money flow in the economy.

Explanation:

• Deficit financing can be defined as planning the borrowings and source of borrowings when an economy is going through a bad phase and unstable economic situation.
• Deficit financing is important for reviving an economy from crisis and balancing the inflows and outflows of the money.
• It is also important for a developing nation India because economic development requires deficit balance.
• Deficit financing also protects an economy from entering into a debt trap.