Ease structural constraints to ensure fiscal discipline: RBI

MUMBAI: The government needs to address structural constraints in policies to ensure fiscal discipline becomes effective and credible, a Reserve Bank of India staff report has said.

The report on currency and finance 2009-12, with the theme ‘ fiscal monetary co-ordination’ has noted it is important to take “policy initiatives aimed at addressing the structural constraints in government finances in a durable manner so that fiscal discipline becomes effective and credible in the medium-term”.

The government has worked towards fiscal consolidation in the post-reforms period by phasing out automatic monetisation of fiscal deficits. Besides, RBI also does not participate in the primary market for government bonds.

This has to an extent reduced the degree of fiscal dominance of monetary policy. However, RBI did provide temporary accommodation to the government through ways and means advances.