In the above backdrop, it is strongly felt that given the large size of the market borrowings, there is a confluence of interest between monetary policy and debt management in India. 40.
The significant impact of the Government borrowing on the broader interest rate structure in the economy and, therefore, on the monetary transmission process in financial markets, makes it a critical component of the macroeconomic management framework. In such a scenario, central bank involvement in managing the market volatility and market expectations arising out of government debt borrowing becomes necessary.