Covid-19 has hit Government funds , but printing more money is not a good idea says finance panel chair


Can RBI print so much money that we are able to buy our way out of the Covid -19 crisis? This question sustain in the minds of the common people of the country which resulted in chorus of people asking the government to spend more and increase the fiscal spending to help migrant labors and provide more monetary claim to them in their Jan Dhan accounts , help industries with lesser taxes as for consecutive 2 months they have no revenue and they have to pay salaries to the daily wage workers and an adequate amount of money goes to farmers that is out primary sector which families are solely dependent on.The government has the similar structure – massive expenditures and contracting revenues.
When Central and State Governments came up in the market to sell off the bonds the cut off was expensive for central it lingered around at 6.52% and for state it was auctioned at 7-9 % which is expensive money to borrow at such time of crisis where the economy is in a steep global recession. This action did not help in the benefits offered by RBI as interest rate was cut at 90 basis point and the reverse repo rate came down to 3.75% which rationalize the step taken by the government to borrow at a higher rate which will eventually result in private corporate borrowing at even higher rate. So the vicious circle would grow and the fiscal spending is completely negating the impact of rate cuts and various monetary policies.

Hence the offer to RBI to print money is taken into consideration – RBI prints money in two cases for buying dollars and for buying government bonds so that the government has enough money for the time period. In the present global scenario Finance Commission states that it will wait for GDP data — the Q4 2019-20 data to be released in the last week of May and Q1 2020-21 data to be released in the last week of August — to get greater clarity on the various macroeconomic variables, N.K. Singh said. The central government, he added, expects a V-shaped recovery, which signifies a plunge in growth followed by quick recovery.

The commission stated that directly borrowing from RBI is not the best in the current circumstances for the government. In conclusion, The Covid-19 pandemic has wreaked havoc on finances of the central as well as the state government. Singh said there are “huge uncertainties” to the tax and non-tax revenues at both levels.

Also Read: Coronavirus Outbreak and its Severity Round the Globe