RBI’s tightening task: How India’s high interest burden muddles the central bank’s job
When a government, the biggest borrower in the system, spends 40% of its revenues on interest, monetary tightening has serious consequences. It affects the government’s capacity to spend, its future borrowing requirement and the central bank’s room for manoeuvre. India’s interest-rate raising cycle, therefore, raises a question: how can the Reserve Bank of India (RBI) restore monetary stability without aggravating an already demanding fiscal adjustment?
