Question

Qhat is the typical period for which the government borrows money

Answer 1

Government borrowing from RBI increases the money supply in the economy. This is because government borrows from RBI in the form of deficit financing i.e. printing of new currency notes. Deficit financing increases the circulation of money in the economy and thereby, leads to increase in money supply.

Answer 2

Government borrowing plays an important role in government's finances to meet its spending requirements. In the current fiscal, the government has decided to stay with the borrowing programme as announced in the Budget 2019. This has cheered the markets and kept yields in check. In the Budget speech, the finance minister also announced borrowing from overseas market but later on dropped the plan owing to currency risks.

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