Business Environment, 4th Edition by Pearson

96 | Chapter 4

from all sources—domestic and foreign (and is inclusive of all landings by the centre

to the states and others). These loan funds were raised from the open market loans,

subscribed by banks and other financial institutions under the pressure of statutory

requirement (such as the SLR for banks), small savings and, most of all, the net RBI

credit to the government, which led to automatic monetisation of the government

debt and, thereby, to increase in money supply and in prices.

Moreover, the government debt was raised at relatively low administered rates,

which induced high-fiscal profligacy. The commercial sector was starved of ample ...