Meeting India’s fiscal deficit target in the current financial year is going to be challenging and the central bank has not yet made a decision on its monetisation, the Reserve Bank of India (RBI) Governor Shaktikanta Das said.

India has spent more than a month in a nationwide lockdown, with its industries shut, to stem the coronavirus pandemic that has caused 26,496 infections and 824 deaths, among 2.97 million cases worldwide.

“Fiscal measures are important and the government is working on a package of measures,” Das, the central bank chief, told news agency Cogencis in an interview published on Monday.

Das said he expected the government to take a judicious and balanced call on the question of the fiscal deficit, while tackling the challenges arising from the pandemic.

“Meeting the fiscal deficit target of 3.5 per cent this year (2020/21) is going to be very challenging, and going beyond it becomes unavoidable,” he said, adding that direct tax collections may also be hit.

Das did not reply specifically to a question whether the RBI would monetise part of the fiscal deficit through private placement of bonds or issuance of any specific pandemic bonds.

“On the current situation, we haven’t taken a view on it,” Das said.

In making such a decision, the RBI will weigh operational realities, the need to preserve the strength of its balance sheet and the goal of macroeconomic stability, he added.

“In the process, we also evaluate various alternative sources of funding too,” he said, but did not elaborate.

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