This is all the more important since market borrowings have emerged as the dominant source of deficit financing at the sub-national level. Taken together, the borrowing by states has attained a critical mass vis-a-vis the absorptive capacity of the market. That makes it imperative to harmonise the market borrowing programmes of the Centre and the States.
Separation of the Centre’s debt management from the central bank will make such harmonisation difficult. 46. Thus, on balance, as long as there are institutionalized mechanisms to negotiate various tradeoffs in a given context within the overarching objective of achieving monetary and financial stability, separation of debt management from central bank seems to be a suboptimal choice.