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2023 | OriginalPaper | Chapter

16. Cash and Debt Management in India

Author : Charan Singh

Published in: India’s Contemporary Macroeconomic Themes

Publisher: Springer Nature Singapore

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Abstract

Cash and debt management in India has undergone substantial change between 1993 and 2000. The unlimited and automatic issuance of ad hoc Treasury bills by the government to the RBI under the administrative arrangement since 1955 at fixed and low discount rates, not only diluted control over money supply but also encouraged fiscal profligacy. Dr. Rangarajan, in his various research-based studies, argued about the need for central bank to have control over money supply which will further lead to price stability. The empathetic assertions, logically argued and followed by academic rigour, led to discontinuation of automatic monetisation through ad hoc Treasury bills in a phased manner starting with an agreement in 1993 and complete cessation in 1997. This elimination of automatic monetisation led to a stronger control of money supply by the RBI. Further, scientific method of computing deficits was adopted by the government of India which transparently depicted the gap in government finances. This helped in encouraging fiscal discipline and resorting to auctions to raise resources for the government. The Fiscal Responsibility and Budget Management Bill, 2000 was another step in ensuring fiscal discipline and financial stability.

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Footnotes
1
Occasional Papers (September).
 
2
Tenth M. G. Kutty Memorial Lecture, January 17, 1993.
 
3
Supplemental Agreement between the Reserve Bank of India and the Government of India, September 1994. See also Rangarajan (2022).
 
6
Ibid.
 
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Metadata
Title
Cash and Debt Management in India
Author
Charan Singh
Copyright Year
2023
Publisher
Springer Nature Singapore
DOI
https://doi.org/10.1007/978-981-99-5728-6_16