Govt bonds and liquidity

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Querist : Anonymous

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Querist : Anonymous (Querist)
07 December 2011 pls tell me hw govt bonds and liquidity r related and issues going on abt fiscal dificit.

07 December 2011 The Reserve Bank of India buy government bonds through open market so it will circulate more money in the market and ease the liquidity situation.

Every purchase of bonds by RBI, government bond auction takes place it is nothing but borrowing by the government to reduce fiscal deficit.

Fiscal deficit=Total expenses-Total revenue generated

It means total expenses of government exceeds the total revenue generated by it.



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