Govt spending can be frontloaded in FY12: RBI

There was a possibility of heavy government spending in the first half of the next financial year beginning April, on account of large government cash holding, Subir Gokarn, deputy governor at the Reserve Bank of India (RBI) said on Thursday. He said RBI would not conduct open market purchase of bonds to contain any rise in yields as it was a monetary policy tool to address liquidity issues and not debt management. "When the (government borrowing) schedule is set with the existing cash balance in mind, that can front-load spending. So that is a possibility," he said. Gokarn was speaking to reporters after the central bank raised key rates by 25 basis points to clamp down on resurgent inflation and warned of persistently higher food prices unless steps were taken to boost supplies.