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	Monetised deficit is the monetary support the Reserve Bank of India (RBI) extends to the Centre as part of the government&#39;s borrowing programme. In other words, the term refers to the purchase of government bonds by the central bank to finance the spending needs of the government.</div>
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	Also known as debt monetisation, the exercise leads to an increase in total money supply in the system, and hence inflation, as RBI creates fresh money to purchase the bonds. The same bonds are later used to bring down inflation as they are sold in the open market. This helps RBI suck excess money out of the market and rein in rising prices.</div>

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Monetised Deficit

What is Monetised Deficit

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	Primary deficit refers to the difference between the current year&#39;s fiscal deficit and interest payment on previous borrowings. It indicates the borrowing requirements of the government, excluding interest. It also shows how much of the government&rsquo;s expenses, other than interest payment, can be met through borrowings.</div>
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	Primary deficit can be calculated by finding the difference between current year&rsquo;s fiscal deficit and interest payment on the borrowings for the previous year.</div>
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	<strong>What is the difference between primary deficit and fiscal deficit?</strong></div>
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	Primary deficit indicates the amount of borrowing which the government needs excluding the interest component. Fiscal deficit, on the other hand, is the difference between the government&#39;s total expenditure and total income. In other words, primary deficit is the difference between the government&rsquo;s income-expenditure gap and its interest payment on previous borrowings.</div>
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	<strong>How is primary deficit calculated?</strong></div>
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	Primary deficit can be calculated by deducting interest payments for the borrowings from the current year&rsquo;s fiscal deficit. Fiscal deficit can be calculated by finding the difference between the total income and total expenditure of the government.</div>

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