Indian Central Govt has 'monetised' Rs. 66,946 crore this year due to rising gap between revenue and expenditure. It can only get worse.
The Indian UPA government has completely messed up its finances. With falling tax revenues and immense expenditure increases in an election year, it is crazy to make ends meet. At last count, the govt had already "monetised" -ie printed notes - worth Rs. 66,946 crore to bridge the yawning gap between revenue and expenditure. As India near elections, it it will print more in the hope that some of it will translate into votes.
Whenever the govt wants to borrow more than what people are willing to lend it, it simply p***es the hat around to the Reserve Bank. It is technically called borrowing, but in reality it is tantamount to printing money to pay for its expenditure.
With so much "monetised" money sloshing about in the economy, the net result is often higher inflation - after a lag. So, if you are celebrating the dramatic drop in inflation from nearly 13% in August last year to just over 5% now, don't. The inflation dragon has only one into hibernation. It will return.
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