The burden of public debt management impinges on monetary policy

INDIA - Report 08 Apr 2021 by Ila Patnaik

There has long been an awkward feature of the Indian institutional environment: The central bank also conducts public debt management, banking regulation, aspires to control the exchange rate, and controls the operations and regulation of the bond market. Given this backdrop and the changes that have taken place in recent years, the Reserve Bank of India announced a new policy tool to calm the bond markets. The RBI committed to buying Rs 1 trillion worth of government securities in the secondary market in the first quarter of the current year. The new tool, the G-sec Acquisition Program (G-SAP) 1.0, was announced to bring down the cost of borrowing for the government.

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