Discussion
Deficit financing means that the government borrows money from the
Answer: C
Deficit financing means borrowing from the RBI.
In the Indian usage, deficit financing is the method of meeting a budget deficit by borrowing from the central bank, which in effect creates new money. Before 1997 the government did this by issuing ad hoc treasury bills to the RBI. Because it adds to money supply without adding goods, it tends to cause inflation.
The Revenue Department is part of the government itself, so the government cannot borrow from it. Loans from the World Bank are external assistance. Since the RBI option is correct, 'None of the above' is wrong.
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