Covid-19 crisis: Budget blowout may see RBI resort to direct financing

The central government is running out of options to fund its Budget and may soon have to knock on the central bank’s door once again for support.

The administration can get the Reserve Bank of India (RBI) to buy sovereign bonds directly or boost dividends to help supplement revenue, which has been hit by an economy-crippling lockdown to contain the virus’s spread. The government is facing a Budget deficit of as high as 7 per cent of gross domestic product, the widest in more than two decades, according to some estimates.

It would “make sense to go for some form of deficit